Arguably they're tolerable in the VC world, or at least pretty common. Empirically an expiration date on a termsheet is not always evidence that a VC is desperate or dishonest.
It's when this idea gets imported into seed funding that it really becomes a problem, because of the synchronous nature of this market. And it gets worse as the number of seed firms increases.
The root of the problem is that people think seed funding is regional. They think they're starting the YC of St. Louis, or wherever. Then after they get started they realize that in fact the seed firms are all drawing on the same national applicant pool, and that the default fate of the nth seed firm is not to be the YC of St. Louis, as they'd expected, but to be the YC of the nth quality bucket. That's a pretty grim situation, and it tempts them to take desperate measures. The VC market is more fluid, so VCs aren't subject to such pressures.
Is this not just a reality of this game? You mentioned Universities. For them 'fairness' is an independently important (though probably imposed) quality. Here there is no such force. Since there are always going to be application deadlines, it would take conscious effort or collaboration to avoid an exploding termsheet becoming the norm. Since it would adversely affect the lowest in the pecking order, you'll always have defectors.
A possible solution is more rounds. Even triennial intake is probably enough to let applicants time applications to meet their hierarchy of preferences.
It's when this idea gets imported into seed funding that it really becomes a problem, because of the synchronous nature of this market. And it gets worse as the number of seed firms increases.
The root of the problem is that people think seed funding is regional. They think they're starting the YC of St. Louis, or wherever. Then after they get started they realize that in fact the seed firms are all drawing on the same national applicant pool, and that the default fate of the nth seed firm is not to be the YC of St. Louis, as they'd expected, but to be the YC of the nth quality bucket. That's a pretty grim situation, and it tempts them to take desperate measures. The VC market is more fluid, so VCs aren't subject to such pressures.