The GF2 theory is actually very sound. I do remember the GTS-V going for dirt-cheap at Newegg, like $60 a pop OEM when retail was going for $120 or more. I also do recall not buying one b/c of numerous reports of the part being defective.
To add a bit more speculation to the mix, VT wasn't paid to destroy them, they received a credit for the defective parts shipped by nVidia under agreement the parts would be destroyed. For those not familiar with the manufacturing/retail industry, rather than having more money exchange hands, credit is issued to long-standing channel partners. To make it easier to visualize, say you buy something at a retail store like Best Buy; if you return that item as defective, rather than say Sony cutting a check to Best Buy for a few hundred bucks, they issue them a credit that will be put towards future orders/shipments. As the article states, VisionTek was strapped for cash, so basically they had paid for goods from nVidia but that didn't do them much good in the meantime (they had no cash, AND had no product to sell). The credit issued from nVidia would be put towards future GPU shipments, but instead VisionTek decided to "double-dip" and sell both the current defective product and as a bonus, get free GPUs in the future.
Part of that credit could have easily been the GF3 Ti200 GPU shipments, as VisionTek offered perpetual rebates for significantly less than the competition within a few months of the parts release (black Friday GF3 Ti200s). From VisionTek's standpoint, they could offer the significant rebates since they essentially got the GPUs for free. By offering a rebate, they were basically taking out a loan, stealing from Peter (you) to pay Paul (the rebate).
Chiz