They have a number of complaints, including the approval process (it takes 2 weeks), the inability to communicate with customers and give them a refund, the fact Amazon let owners of incompatible devices buy the app. That last is important, but it's also something that can be fixed.
I'm not sure that pulling the app because of poor filtering is the best idea; we know that Amazon already filters based on the version of Android OS. It wouldn't take much to add a per-device filter to block the ones that lack hardware or software support.
The long approval process is worrisome, IMO. It prevents developers from responding promptly to a bug report. Bithack was used to getting a report and posting a fix within hours. Thanks to Amazon's 2 week delay, that's just not possible.
On the other hand, I think the developers are reacting too soon. One of the complaints was bad reviews and an inability to respond. One of the early reviews gave erroneous info about the app. but that one bad review doesn't matter quite so much now that the app now has 136 reviews, and over 130 predate yesterday's open letter. This app has a 4 star rating on Amazon and it ranks as number 12 in the Amazon Appstore.
The developer might be unhappy but the app seems to be doing rather well.
But I will admit that i have a personal bias here; Google won't let me use the Android Market (on all but 1 of my devices). If a developer pulls out of the AA, I'll probably never notice that they even exist.