In your example, what if the authentication servers are down?
I understand this concern, and I agree in part. A single player portion of a game should be able to be completed offline, and there is no valid arugment that can be presented against this fact. Ubisoft's attempt to change an industry wide accepted fact are futile due to the efforts of talented pirates.
Online Authentication for Online Multiplayer is entirely acceptable. What happens if the authentication servers are down for some reason? Then you can't play multiplayer until they come back up. This is the same as if there is a problem with your phone line, or computer. It's unavoidable, and to think that a 100% full-proof server exists somewhere is entirely unrealistic. If you're paying to play, such as with the World of Warcraft, then you can expect a higher level of service - such as decreased downtime or backup servers to keep you playing.
How about someday in the future when the game is no longer considered worth supporting? Will the company offer a patch to remove online authorization -- I'd bet SD would, but others?
The bandwidth required to authenticate a game's CD-Key is incredibly small, and most servers are third party meaning the company doesn't really have an on-going expense. Authentication servers are fairly unlikely to be shut down, unless it requires a constant stream of data and thus higher bandwidth. Assassin's Creed II's servers are certain to be closed down at a point in the future when the cost of the bandwidth exceeds the amount of revenue generated by the game. If the game is entirely first party hosted and then discontinued entirely, then the game should be unlocked.
This isn't just a hypothetical situation -- hasn't it already happened with some game/music services, leaving the customers out-of-luck?
What you're talking about isn't the game rendered useless - the first party multiplayer servers for several EA titles were closed down, leaving the entire community with third party servers. The games still function.
The music service you're talking about was Microsoft's music service, and it does present an issue because the songs that are downloaded are locked to a computer and with the service closed you're unable to 'unlock' or 'migrate' them to another computer, thus requiring the user to keep that computer exactly as it is; no upgrading, no changing components, etc. The music files were not unlocked.
How about an old-fashioned LAN party? Will LAN MP be assumed to be internet and so require online authentication?
Unfortunately this seems to be the way of the future. Starcraft II famousless ditched LAN, prompting fans to collect signatures for a petition. I believe Blizzard confired that Starcraft II would indeed feature LAN-like features, however they would require a constant internet connection as it's routed through Battle.net.
Can't online authentication be hacked as easily as other DRM?
Sure can, however DRM isn't about stopping piracy, it's about stopping re-selling games. Piracy is the all-purpose excuse of this generation's businesses. Game didn't sell enough? Pirates. Multiplayer severs messed up? Pirates did it. Game shipping with restrictive DRM? Response to pirates. Nine sequels to a single game? The effects of Piracy. Global Warming? Pirates downloading too much. Wife left you? Pirates caused it by breaking DRM.