I wouldn't say it meant they were "correct", more that they got away with it. You cite yourself that the last half of the season was better than the first half. How much of that is due to money saving measures in the first half? How much better would the entire season have been? how much higher could the ratings have been if not for the bad word of mouth generated by the first half of the season?
Actually, I stated that I felt the second half of Season 2 was better than everything that came before it (since the pilot, which was genuinely brilliant). Now, the budget cuts were there for the entirety of season 2 and clearly limited the scope of the storytelling, yet I found the stories of the vast majority of season 1 to be pretty bland, and other than the pilot the only moment I can recall thinking "Yup, that be some good TV" was the death of Lori's sister and her reaction to it.
Apart from a couple of drives out from the farm, a short time out on a street following their excursion to a studio-shot bar, the vast majority of the storytelling STILL revolved around the Farm and its surrounding woods, like the first half. The difference being, the writing appeared to tighten up, as did the friction between the characters. Some of it was super-heightened, for sure (especially between Dale/Rick, Rick/Lori) but it made for more engaging television for me. Then they blew the rest of their cash on the finale.
And, also, in the end, let's not kid ourselves. The people who spend their time critcising the show on the internet, or in the papers, clearly don't register on the shows' ratings.
The first season finale aired with 6 million viewers. The second season premiere came in with 6.6 million. The Second season mid-season finale came in with 7.4 million, the Mid-season premiere came in with 8.1 million and the finale came in with 12.9 million (source below). The show, regardless of criticisms during the second season for its slowness and "one-set" stories, still kept on growing, and more people came back for the mid-season premiere than the Season premiere. Almost unheard of in TV.
I don't agree that the Execs should have cut the budget, but in the end this is actually quite a SMALL story - a band of misfits on the run being chased by landsharks - and clearly it can be made on a small budget (and still LOOK wonderfully cinematic, even if nowt is happening) and STILL bring in the viewers, week after week, growing in the key advertising demos.
I don't expect to see a budget but again for season 3, but neither do I expect to see an increase. For all the moaning AMC's business model on this show works. Did they get lucky? Not sure, I think they realised they didn't need to put 50 zombies and a tank in every episode to make it work.
Again, nothing against Darabont, and from the rumour mill it does appear he was unjustly shafter, but those 6 episodes run by Mazzara felt closer to what I wanted from the show than the 12 following the pilot run by Darabont.
We'll see if it was a fluke come season 3, but given what the comic has to offer, and the fact that the writers appear to enjoy throwing in the occasional curveball to keep the comic reader on his/her toes (See Dale) then I have much higher hopes going into Season 3 than I did going into Season 2.
But that's just me