I don't think that existence is always preferable to nonexistence. A good life seems to have value, but a bad life is, ceteris paribus, not preferable to nonexistence. The problem with average utilitarianism is that a good life is declared worse than nonexistence if it is below average, but I want to preserve the value in that life, not eliminate it. In general, the solution is not to add a large existence term, but to make sure that the utility function as stated matches your actual preference for whether or not someone should exist.
Have you actually found a knockdown argument, or just an area where our ethical intuitions go out of scope and stop returning good values?
Argument for what exactly? We've touched on a few different issues and it's not clear to me what you mean here.
One can use a simple hack to get round this problem: set any being that has existed but no longer does as having utility zero (for some zero level). In that case, average utilitarians won't want to bring them into existence, but won't want to elminate them afterwards.
There are other ways of acheiving the same thing. I think that people are far too inclinded to over-simplify their moral intuitions, based on over-simple mathematical models. Once your preferences are utility functions, and with some decent way of dealing with copies/death, then there are no further reasons to expect simplicity.
Some people see never-existed people as moral agents, and claim that we can talk about their preferences. Generally this means their personal preference in existing versus non-existing. Formulations such "it is better for someone to have existed than not" reflect this way of thinking.
But if the preferences of never-existed are relevant, then their non-personal perferences are also relevant. Do they perfer a blue world or a pink one? Would they want us to change our political systems? Would they want us to not bring into existence some never-existent people they don't like?
It seems that those who are advocating bringing never-existent people into being in order to satisfy those people's preferences should be focusing their attention on their non-personal preferences instead. After all, we can only bring into being so many trillions of trillions of trillions; but there is no theoretical limit to the number of never-existent people whose non-personal preferences we can satisfy. Just get some reasonable measure across the preferences of never-existent people, and see if there's anything that sticks out from the mass.