-The biggest issue is that custom editions segment the global secondary market for a given textbook into slivers of useless fragments. Instead of Campbell Biology, Regular Edition being bought and sold between Stanford students and students at every other college in the country (this significant supply drives the price down), Campbell Biology, Stanford Custom Edition is only ever going to be bought/sold by Stanford students. This hurts students in multiple ways: 1) the bookstore is the only place they can BUY the book from. Period. 2) the bookstore is the only place they can SELL the book too. Custom editions are a perfect storm for bookstores/publishers.
-Custom editions are cheaper than what the regular edition costs in terms of what the bookstore would charge for each, but if you compare prices on the regular edition online, there are usually significantly cheaper prices out there than what the custom is being sold for at the bookstore.
-In the rare case where a custom edition is being used, but a regular edition is acceptable - the bookstore presenting both options and telling you to pick one will almost never result in you considering that the regular edition would be cheaper online. By adding this extra noise, they artificially make custom books look more affordable.
I agree - there are tons of professors that are on the right side of this fight. Textbooks SHOULD be free. And the fact that custom editions are even adopted is proof that professors care about students. They're just a terribly poor solution which reinforces the problem instead of solving it.
Give the publishers credit - custom editions are a genius business move.