I believe this might be what Anonymous is saying.
Those who aren't good should be told so. (Giving false hope or praise isn't good). What I believe he objects to isn't the harsh reality of their lack of talent, the criticisms or broken dreams. It's the malice that goes beyond the "you don't have talent" or "you won't make it" that he is objecting to.
Yes, some people are delusional. Some probably fantasize on how good he/she thinks his/her talent is but, tearing someone else down doesn't make the "you don't have the talent" any truer. It just humiliates people who try. It also makes for "good" TV and gets a large viewership of those who both dislike and like Simon.
Something similar could be said of the judges. If they can't take the hours and days and weeks (IMO, that type of scheduling sucks even if you get paid well) of crappy performances, then they shouldn't be judges for the whole process. I think being rude or cruel might be a way of being spiteful to one and telling others, "how dare you take up my time this way".
Maybe a happy medium would be a selection committee before they might move on and meet the judges. They all wait long enough so, that shouldn't be bad for the contestants.
One little thing. On Fame, (yes, I was one of a few who saw the whole season ) the judges did tend to bow down to what Debbie Allen would say. That was unfair to the judges and the contestants who could have used their professional and constructive criticisms. Either way, judging can be a hard balance.