All
I enjoyed reading this post. It really feels like "it could have been me." 
As to the "defect driven design". I have been in IT for way to long and for more than a decade as an architect. I understand the organizational beauty of this approach but as an Architect I hate it.
And then I read this:
As you can see, though, this process might not work so well if you are the developer -and- the client (unless you can really compartmentalize your thoughts and ideas to such a point that you might be fundamentally broken as a human being)...
And I realize this is actually how I develop with with Arduino:
1 - I want a web application; I get an ethernetshield
2 - I say "I load up the URL and all I get is a 404 error" (that's my first defect - put it in the bug system and fix it with a blank index.html page)
3 - I says "Ok, now it comes up, but it's blank - it's supposed to have text" (second defect; add text)
4 -I says "I want a button to get the Arduino values" (third defect - fix again)
5 -I says But I want all Arduino values (add values)
I did 3 and 4 yesterday evening. XD I know I have all these defects already in mind and you may call this a plan, but if in the progress something changes there is no plan to adopt and no defect to be canceled, there is no time pressure, no allocated resources..... And this reduces overhead. And indeed it makes me look "broken as a human being". Especially with my girlfriend. :~
Best regards
Jantje