To me, alternate models are LEGO. The entire point of a LEGO set is that it's not just one toy - you can make more than one thing with it! (In theory...) That's why I'd not only advocate putting pictures of alternate models back on the back of the boxes, I'd ask LEGO to put instructions for them on their website, as well. (Or through LDD, a la Hobby Train, but on their website is prefered, as, judging by lego.com's Hobby Train reviews, many people can't get LDD 2.0 to work.) That way, people who want to try building the set from just the picture would be able to, but if those people get stumped, they can always turn to lego.com. It would cost next to nothing to put the instructions there, and it would drive traffic (and thus, sales) to lego.com.
However, I agree with evilnailman - the use of "special" parts (Big Ugly Castle Pieces?) reduces the amount of possibilites. That's why, like Bruce N H, I realize that this has more to do with the philosophy of LEGO more than anything. There is a balance between "construction" and "play," and I agree that LEGO has probably shifted to far over to "play." But if I (or a child) just wanted something to play with, I could easily buy something that wasn't made of small pieces - it'd be more durable, more "realistic," etc. LEGO's packaging now promises "Better Building, More Fun," but I ain't seeing it.
I collect LEGO themes that start with "C." And Pirates. I call them "Corsairs."