Y'know, back in the good old days, I played a lovely expansion called Red Alert 2: Yuri's Revenge. It had a new faction, added units, different maps, and a new campaign.
Personally, it might as well have been Red Alert 3. It wasn't as much an expansion as a new game. Certainly, the campaign was a slightly shorter than the original Red Alert 2. But it also cost slightly less, so it balanced out. To me, Yuri's Revenge is the perfect model of how an expansion should be. More quality game (with actually new content) at an appropriate price.
The problem with DLC is, that the more you cut it up, the less satisfying it is. If all the Fallout 3 DLC were put into an expansion pack, assuming the DLC was linked story-wise or something rather than the rag-tag additions they are now, it would be much more satisfying. For all the DLC (Point Lookout included), if it were somehow related to so their combining made sense, I'd pay for it, as long as it was appropriately slightly lower priced than the original game.
Now, I'm not really a big supporter of free updates. Certainly, they're great, but hardly a neccesity. I think the ideal model would be to first have a quality standalone game, which is most important. Then, adding new game ideas and content into an expansion pack sometime later. Meanwhile, patches could have some tiny bit of extra content (a few new maps/objects/whatever depending on the genre) If there is anything radically game-altering, or not able to fit into the expansion because it feels odd in combination, make DLC. One or two at most, not five.
On the subject of quality DLC, let's take Oblivion as an example again. There's the infamous Horse Armor, but also Battlehorn Castle, Frostcrag Spire, etc. These are not really DLC. They're payed Mods. (Which are technically DLC, but you get my point)
Now, if an expansion such as Knights of the Nine would include some of these, then it would be great. You've got a large amount of new relating content, with a bit of extra things served on the side. Luckily, such an expansion does exist, but not until after everyone had already bought those things as DLC.