If any selling method can be said to be morally dubious, it would not be large undercuts. Rather, it would be the SMALL undercuts, of only a few gil. Essentially, when you're undercutting by a few gil, you're not trying to price competatively. You're trying to sell at the SAME price (relatively), but sell faster. You're gaining the benefits without any sacrifice.

Again, this is assuming that morality has any weight whatsoever on the marketboards, which, really, isn't the case. But by the same token, neither can you criticize the large undercuts.

Players can price however they like. You may think them foolish - but if they're stopping you from selling your own product, they may well be on to something. Rather than complain about it, adapt. Accept that the market for that item has dropped in price, adjust your price to match. If the prices are too low for you to make any sort of profit, leave that market until it becomes favorable again. If it stays low, check and see if a new source for that product has opened up - for example, does the item drop from treasure maps, now? Is it a common quest drop?

For example, why won't people pay scads of money for Tier IV Determination materia anymore? Well, for one thing, no one's piling the stuff into their Nexus weapons anymore. For another, the Beast Tribe quests are pretty much burying players in the stuff. An inattentive seller may find that their favored product has had the rug yanked out from under it and come crying to the forums - that is why inattentive sellers don't succeed on the marketboards.