"But we can't have an ongoing arms race among manufacturers that determines all the records and who sets them."

Why not? From an engineer's perspective, it's a pretty posh situation. The corporate honchos have discovered something that's lucrative for competitors, decide to do something similar, and consequently pour more money into R&D. More R&D hires, better funding, more software purchases (disclosure: I'm a computer scientist, so my ilk benefits when people buy modeling software), etc. If some kid who's fantastically talented happens to lose to someone who's marginally less talented because the other kid was richer and could afford a suit that costs as much as a Chanel gown... well, kid, get out of swimming.

Honestly, when was the last time an athletic event contributed something lasting to mankind (and I'm not talking about those nostalgia stories about your pappy taking you to the ballpark that you croak out on your deathbed. could you just shut up about those?) ? In comparison, when was the last time a feat of engineering contributed something lasting to mankind?

Ill-defined ethical cost to some sport VS. concrete and lasting technological advance? I'll take the latter any day.

True, more funding is probably available for R&D because consumers/spectators have taken a greater interest in swimming thanks to the amazing feats of Michael Phelps. So yes, engineers should be grateful to consumers and the stars who drive those consumers. But it's not as if these advances and the ethical quandaries they raise are going to kill the sport of swimming. So just enjoy the ride.

Isn't that what the greatest technical advances do? It destabilizes the norm until the norm adjusts, usually for the better.