To say that games are a service actually implies that there's...well, service involved, and the only games that I think even come close to fitting that definition are MMORPGs. I don't count DLC as part of a service because most of the time you have to pay extra for it. As for patches, developers are under no obligation whatsoever to ever release a single patch once a game is out, and if they do so it's either because they want to keep their customers playing longer or because something about their game was so broken that it was running the risk of affecting their sales. If games really were a service, they would be expected to release patches regularly, and you would be entitled to your money back if they failed to uphold their end of the bargain, even before steam officially pulled the trigger on it. I see games as a good, albeit a good you don't fully "own" in a legal sense, which has certainly caused some issues regarding used games that I hope we don't see again.
On a separate point, I think this idea that's been proposed of "letting developers opt out of refunds" is utterly laughable. If developers could just decide not to give refunds, then how would we be any better off than we were before? Any major developer (DICE, Ubisoft) could just knowingly release a buggy, broken piece of shit like they always do and then say "Sorry! No refunds!" I absolutely oppose giving any developer special treatment. Everyone should have to take the same medicine.
Regarding the matter of finding the right price point for short games, there really isn't a single magic number that works across the board. These developers really just need to use their best judgment to decide, realistically, how much the experience they provide is really worth. I couldn't say where the sweet spot is, but I do know that charging 20 dollars for a 90 minute vignette like Gone Home is practically an insult. I would feel ripped off as all hell if I paid 20 dollars for that game.