If LoL doesn't make money for Riot, the developers don't get to eat. So yeah, I'm not surprised they went with a F2P model with a little bit of pay-to-win in there, and their variation on it (rotating characters and you pay to keep the ones you liked) is a novel and fair approach to it.
Of course not, they are free to employ whichever model they want. I think his reply was more directed at the statement: "I think League of Legends or maybe Team Fortress 2 are about as good as it gets..."
LoL is somewhere in the middle of the spectrum of "purely cosmetic" and "pay to win" while Dota 2 is on the "purely cosmetic" end. So in the category of Dota-like games, Dota 2 is perhaps as good at it gets, in terms of its free-to-play model.
My guess is that Riot simply didn't bother changing the model they went for in the first place for LoL, but I think Dota 2 has proved to be a great business model for Valve.
I'll be fair, I haven't seen any numbers from Valve, but if you pay any attention to the selling and trading of TF2 and Dota 2 items on Steam and many other places, you'd notice that people are outright making a living out of the whole Steam ecosystem.
That remains to be seen. Do we even know if HoN is profitable? My impression is that League of Legends is the only MOBA to turn a profit so far, but I could be mistaken. Based on how drastically they've altered the game and the changing business models, I certainly didn't get the impression that S2 was satisfied with HoN's returns.