It's very true, if anything, a decent GM is Critical.
On the previous point of "Why not up the 1st level characters to 5th level power" and "Why bother having 1-3rd level characters".
Is quickly answered when your party of 10th level characters get beaten to death by a surly pack of hungry 12 year old street kids. . . .RM assumes NPCs will be built like PCs, even if abstracted to less detail. . .and if you lift the bar to 1st level = able to casually survive a dangerous environment instead of 1st level = noob who can handle danger as long as they have backup and are careful. . .then the pack of 12 year old street kids is dangerous indeed, since you can't downgrade them far below 1st level.
RM already does a good job of jacking threat levels, to where in RM2 or RMSS I wouldn't be casual about taking a 10th level party down into a warren of alleys and rubble tunnels held by scores of hostile 1st level 12 year old street urchins. . .but if you culled the bottom off the power scale to make them 5th level equivalent, that would be a really scary slum indeed. I'd likely call for the corporal hicks solution and burn it down from a distance.
1st level lets you play characters as noobs, the 16 year old kid who just joined the watch, the magician's apprentice who can barely spell cast, or the thief who calls it a good day when he steals two apples and gets away with it.
If you want to play the hardened veteran, the journeyman mage just going out on his own after leaving his master, or the burglar who steals rare jewelry on commission, you're better off bumping it to a higher level to start, but that's an indication that as GM you want to start off with established, experienced characters, not noobs, which is fine, but isn't a system defect. If anything, excessive competence at 1st level leaves the question open as to if something is defective, ala "But then what level/profession are the surly 12 year old street urchins?".