If you have a free version of your app, that will be the only version many people will ever see. So, for the Free users, that app — that extremely limited app that lacks almost all of Instapaper’s best features — is what they think Instapaper is.
I was giving them a choice: Stick with this limited app, or upgrade to the paid version with all of these great features. But since they had never used those features, they didn’t know how much they wanted them.
Of course, this is another reason that the App Store should support fully-featured trials.
Sidenote: I would much rather pay (say) $10 for an app that I’ve tried and know that I like, than buy a bunch of similar apps for $1-5 each and then “throw away” the ones that turn out not to be as good. Paying for what you use, rather that what you can be induced to buy-to-try, sends better signals to developers about what’s good—and also would lead to more meaningful top-10 charts in the store for users.