Small business needs an easy CMS whereby staff can do most of the tasks without present "IT Crowd". AFAIK WordPress gets it done (with some minor problems - as you wrote fe. updating is a problem for non-technical people and WordPress haves no MVC, so it`s easy to go spaghetti way with the code). WordPress devs are trying to resolve problems which are most voted within the community.

They're not minor problems. Please don't underestimate the epidemic of hacked sites that are a direct result of end-user unwillingness to upgrade and possibly break their site. This is a problem that can't be solved without significant architectural changes. Customers are more willing to risk getting their websites pwned than to risk an upgrade that may take their site down, so upgrades often aren't done for years.

It's not a small problem, its a huge one, and the primary reason why I can no longer recommend Wordpress.

I agree with "Security is a process, not a product." AFAIK security is important for WordPress team. There is a lot of good documentation on a project site and there are some materials from WordCamps (fe. http://codex.wordpress.org/Hardening_WordPress)

Latest WP "hack" via botnets was because of weak logins and passwords which are set by the users. Can you blame WP devs for that?

Speaking about upgrading; making updates easier it`s also one of the goals of the project. Also it isn`t that hard when you develop WP sites using information from WordPress Codex docs.

I hope it will get better with time, and as i wrote people are working to get things better. Sorry to hear that you are not going to recommend WordPress any longer.