The way I look at this, is that those who would be running a VM, would not be interested in stressing the CPU in overclocking and would rather have a guaranteed tested, advertised speed for computing. Overclocking, can affect stability in general and in a VM it is something that I do not think anyone would run in a risk of (generally, there would be many crucial software at work).
To put it another way: there's no real market for VMs on overclocked chips, right? If that's the case, then there's no economic incentive for Intel to deliberately cripple VM-related instructions on the k chips since nobody's going to be using it anyway . . . right?
For that tiny number of people that overclock AND run VMs - you know, the ones that actually know how to stabilize an overclock for mission-critical apps - the k chip is a nice upgrade for some extra cash. Sticking it to them by making them choose between a k or non-k chip for their VM work doesn't make Intel any extra money. It just makes a few people mad.
The locked multipliers, is a practice that has stayed - mainly because in my opinion in the past, many third party vendors would sell chips that pretty much falls into what some have done in the past as noted by this quote.
K chips, by their nature, could be resold as something else entirely if, say, there were some higher-end chips out there that the k chips could be made to emulate via overclocking.
The way the k chips are set up, you don't really save much money buying them (especially not the 4770k) vs. some other part from the same wafer. Intel has mostly killed budget overclocking (boo!). People sure as heck aren't going to fall for a desktop k chip in a workstation masking as a Xeon (the people that, presumably, would have some real need to run VMs at work).
So, while your observation has merit, it's not entirely related to the point being made by the OP: Intel probably isn't losing money because people are pushing 4770k chips on workstation customers in Singapore (or wherever) that are really trying to buy Xeons for VMs. Any customer clueless enough to run a desktop chip in a workstation thinking it's a Xeon probably wouldn't notice the missing instruction sets anyway . . .
If you think businesses are taking advantage of people, do not forget that people INHERENTLY take advantage of people, no matter what side of the river you stand on.
In this particular instance, I think Intel is annoying a minority of enthusiasts in such a way as to make no significant profit.
Running multiple processes of VMs and native OS on an untested spec out of the CPU line is risky and thus some virtualization features are "binned" out, because on that same boat, why should the VM guys pay more for the overclock or even need it to begin with?
Nobody's saying that the majority of VM users should be paying extra for overclocking features that they don't want. If they want a desktop chip for VM use, get a 4770 and call it a day. If they want the Xeon, great, it's there for them too. Leaving all instruction sets active on the k chips doesn't affect that at all.
What you should be wanting, is another differentiator, at a bit more of a price increase (a Z version if you would) that included both, and you can gladly risk of reducing your CPU life span in an overclock and with virtual machines running.
That might work, but super-segmentation would be pretty unnecessary, and the expense involved adding another SKU to their supply chain would probably not be offset by the extra $30+ per chip they'd be making selling to the minority of overclockers that have an avid interest in robust, high-performance VMs. It would have made more sense to just leave all instructions active on the k chips.
The mere existence of k chips is due to Intel throwing a bone to overclockers who feared that all overclocking would be dead on Intel platforms after Nehalem. There are plenty of people (notably AMD fans) that enjoy griping about that. Needlessly stripping away a feature that most overclockers tend to ignore is just another bullet point on the list of complaints that overclockers could conceivably make about modern Intel platforms.
edit: grammar
edit2: forgot the word "be", grr.