Although it looked like a terrible decision, it's worth pointing out that that sort of thing happens all the time. Freekick, players in the box, someone falls over and ref gives freekick to the defenders regardless of what happened. Similar disallowed goal put England out against Portugal a few years ago.
That said, many a time I've wondered about the 'neutrality' of the refs in top level football. A few years ago there was a match-fixing scandal with Italian football teams (also affecting European games, not just domestic ones). It does happen.
This is probably the worse of the calls seen during this world cup. I still feel that this year is worse than usual, I'm wondering if those vuvuzelas are affecting the refs. Yellow cards seem to be flying out of the refs pockets too. Let not mention the few questionable red cards.
Yesterday someone posted a cool post about how the game is meant to scale down or up to whatever level of play (pro amateur...) I think it's required to accept these imperfection in the name of a simple game.
As for the conspiracy. I'd prefer to believe that the ref was incompetent ;p
Being able to play the game on a budget is a (valid) argument against video replay, but it still doesn't explain why refs don't have to specify what rule is being violated by whom. The ref is under no obligation to explain what he thought he saw, even after the match, and that's something that doesn't take expensive equipment. If it turns out the ref was wrong on instant-replay in hindsight, that's one thing, but the complete lack of transparency and accountability is aggravating. I'm still not entirely sure what the call in question actually was, other than one that would disallow a goal.
FIFA is a political entity, and it acts in its own interests, not those of the teams, the fans, or even the sport. My British co-worker told me that he thinks FIFA keeps the refs unaccountable because getting people riled up over bullshit calls makes them more emotionally engaged with the sport.
One glaring inconsistency with the 'scale' argument: substitutions. Have you ever met youth leave (competitive or otherwise) that didn't allow free substitution? Hell, do you think that in their quintessential (and cliche) example - the street/field/dirt of a developing country - they wouldn't sub out to let others play?
The reason this frustrates me so much is that it encourages diving. If you are tripped, step on the group poorly, lose your breath, get the wind knocked out of you, etc., it behooves you to dive and try to convince the ref to stop the game (often convincing the other team to kick the ball out). While you wouldn't be able to sub immediately either, players try to make their injuries seem more severe to get more recovery time, knowing they'll have to perform in full form when they get up.
Open substitution would make it so the players would have to accurately convey to their coaches whether or not they should be substituted. Feigned injury severity would result in miscues as to strategic advantage by substitution.
That said, many a time I've wondered about the 'neutrality' of the refs in top level football. A few years ago there was a match-fixing scandal with Italian football teams (also affecting European games, not just domestic ones). It does happen.