The soft (and hard) failure seems to be a tempting but unnecessary case of pseudo-rationalization.
I'd have called it "the danger of falling in love with your model". The mathematics of having a utility function is far more elegant than what we actually have, a thousand shards of desire that Dutch-book you into working for the propagation of your genes. So people try to work like they have a utility function, and this leaves them open to ordinary human-level exploits since assuming you have a utility function still doesn't work.
I think we should stop talking about utility functions.
In the context of ethics for humans, anyway. In practice I find utility functions to be, at best, an occasionally useful metaphor for discussions about ethics but, at worst, an idea that some people start taking too seriously and which actively makes them worse at reasoning about ethics. To the extent that we care about causing people to become better at reasoning about ethics, it seems like we ought to be able to do better than this.
The funny part is that the failure mode I worry the most about is already an entrenched part of the Sequences: it's fake utility functions. The soft failure is people who think they know what their utility function is and say bizarre things about what this implies that they, or perhaps all people, ought to do. The hard failure is people who think they know what their utility function is and then do bizarre things. I hope the hard failure is not very common.
It seems worth reflecting on the fact that the point of the foundational LW material discussing utility functions was to make people better at reasoning about AI behavior and not about human behavior.