It sure does. But you have to understand that what your players were doing and you rewarding them for it, is actively discouraged by the system and people everywhere will notice this as the very first thing. I bet any money that 3e will not have a sidebar talking about awarding players more points for interesting backstory.
It can be done right, there could be rules for rewarding players for backstory wich would level them with others while giving them merits. I personally really like an idea that you could get merits for free if you can come up with a clever backstory that explains them and your GM approves it. But it's clear that Holden wants to go the opposite route and discourage players from getting things that they could get during the game. Which means encouraging players to start with clean sheet, high stats and little backstory.
With this post, you take the statement "I don't want to create a system which is abusable by some players to get an unfair advantage" to mean "I don't want to create a game which encourages people to make characters with interesting and evocative backgrounds." This seems to be your opinion on the matter, and not what Holden has said.
And besides that, how exactly is the system of rewarding people for backstory different then any flaws system? I mean, this is exactly what flaws are trying to do. The fact that Holden didn't see any system that did it right does not mean it's not what it's trying to do. It simply makes it clear that it's not something Holden wants to do.
Some people do not pay attention to details like that, but game developers by definition have to pay tremendous attention to such details.
Personally, I reward characters for writing a backstory, even if nothing bad happens to them in it. The point of rewarding them for making a backstory is that it encourages a player to think about their character's particular life, and how their experiences have shaped them differently from the player.
Flaws only reward players for taking bad experiences in their character's lives. For backstories and flaws to be equivalent, all backstories must by definition be tragedies.
Sorry, but you're wrong. If you develop contacts during the game you don't pay anything for them. Basically the merits cover backgrounds and more, but some of them can be developed duirng the game- like artifacts, contacts, familiar, cults. And there will most likely be merits that can be purchased only during chargen.
You have no way of knowing if any of the above statements are true in Exalted Third Edition, unless you are a developer or freelancer with access to the draft of the core rules.
Don't you find it strange that Holden can simultanously hate on flaws for enforcing points mining and wrong behaviour... But at the same he's totally down with BP to XP division doing the exact same thing?
Holden clearly does not think that emphasizing certain behaviours during character creation is bad, he actually thinks it's a good dynamic. That dynamic stays where it was.
I find it reallly weird how Holden assaults one way of enforcing this dynamic while simultanously defending another form of the same thing.
The dynamic I referred to in my post was "flaws incentivize players to take the maximum points which have the least detriment." The dynamic you refer to her is "emphasizing certain behaviours during character creation is good." These are not equivalent statements.
Taking the two together, plus adding in what Holden said about bonus points, I get a very different picture emerging for me. What I hear Holden saying is
"Emphasizing certain behaviors during character creation is good, except where it encourages players to attempt to min max by taking minor detrimental effects in exchange for power boosts which may unbalance the game."
If you do not agree wih this statement, that is fine. However, it is highly unlikely that arguing with the developers will change the core rules. Instead, why not write up and propose an alternative system, for those who may want to use it? If you write up a good enough system, maybe it will catch the eye of the developers, and they will ask you to freelance for them to write the system into a supplement? That is ultimately how all the current developers and freelancers got their start.