I also don't believe it to be unethical. Simply put - that dog was the superior dog to that judge of that day. If he beat your dog so be it. Personally I would see it as my dog losing to the better dog (conformation wise), not that a dog that isn't going to be bred stole my points.
The only point that would be unethical would be if they bred him.
I would have to say that if my dog could win conformation classes but did not pass any tests - I would still show until they got their championship. Why? Why not? I would be disappointed in the test results, but if I wasn't going to breed the dog - it shouldn't matter anyway.
I haven't shown dogs before (only horses), but I hope to one day. ;) I find it sad that Canada and the US don't have altered classes. I think that Conformation classes are just another way to keep people interested in dogs, good breeding and breed encouragement. Why not allow people with good looking altered dogs to show them? I think anything that encourages people to stay involved with their dog and their breed is a good thing! :D
This person has a nice dog, is involved in the breed and has gone through responsible testing for possible breeding. As long as the dog isn't going to be bred, I don't mind an owner still being involved with their dogs, their breed and encouragement of responsible breeding.
I've known of others that would have bred him anyway. :(