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They're punished because DH adds nothing of value to a team on defense. Any player, no matter how bad of a defender he is, can play the position. True, taking Adam Dunn out of right field and putting him at DH saves your team runs, but that doesn't now make Adam Dunn more valuable relative to other players. So saying, "well at least Morales isn't butchering first base or left field on a nightly basis, so his value is higher than it would be if he played defense every night" might be true, but to account for the big hit for adding zero defensive contribution, 17.5 runs according to fangraphs, he has to be that much better on offense or base-running. His career wRC+ is 118. And it's been said already just how bad his base-running is.
So add it all up. Being the 60th best hitter in baseball while also being quite possibly THE worst base-runner and costing your team ~17 runs/year because your body can't handle any position defensively for more than a spot start here and there adds up to an OK baseball player. His last 4 years, ages 26-30, he has accrued 6.9 WAR over 1885 PA's, for an average of 1.7 per year. His last 3 years he has gone 1.2, 1.7, and 1.0 this year with a month to go. Is he more likely to make gains offensively or start slipping in his age 31 season? What's your opinion?
And I have to disagree with your statement that we don't have the personnel to rotate the position. We have a team full of DH types, so locking up that spot next year for 1 guy seems like it could put you in some tough spots with your roster like it has this year. Having less positional flexibility with one guy has a domino effect on the rest of the bench. Have 2 guys with no positional flexibility, well, we've seen how that plays out. Actually, we've had 3 DH's on this roster for the majority of the year.
But these are relatively minor quibbles. We both agree that Morales does provide something of value. I'm just not as exited as you and doc are about what he is as a total package. I don't think he's even worth $10 million a year, but with the Mariners payroll being what it is next year, the difference between 7 and 10 probably won't matter.