I too have thought about how ads in paid apps seem "rude," but lately, I have begun to wonder if there is actually a middle ground. If you decide to sell your application for a low price when you know that users would be willing to pay much more, is there something wrong with using ads if you let the user know before they purchase? I am pretty conservative when it comes to buying mobile apps, and I think I'd be a lot more likely to pay for a $0.99 app with unintrusive ads, than pay $5.99 and never see ads.
Ads are the last thing I want to waste limited smartphone screen real estate on. I'll happily pay to avoid ads, but there's no way I'm going to pay for something that forces me to wade through ads. If your app isn't profitable, raise the price.
It is not a sense of entitlement--- it is years of watching network television where the content (that cost millions) doesn't cost the viewer one red cent; it is all supported by advertisements.