I don't ever recommend dropping and recreating the warehouse from scratch, although I've seen that as a solution from some consultants. It's faster to develop but ultimately (and as you correctly ask about) doesn't scale well. Incremental updates are the way to go. It will take longer to develop, but your nightly run times will be stable instead of incrementally increasing until they reach a point where it's unsustainable.
I won't disagree with you outright, Ron, for the simple fact that if you want a scalable solution you're dead on target. That said, most folks aren't working against huge data, and overdevelopment is overkill.
An example: A current warehouse I have starts with a Truncate/Reload component. This has a strict limit. Any table over 1,000,000 records OR longer than a 10 minute load time (they're concurrent) falls out to a delta component for the next sprint. That's where we decided to implement our sanity check.
You have to work against expectations of the developer vs. expectations of the development. Good enough is, in most cases, good enough. Smaller shops, like the one the OP is involved in, will probably only need SCD2 type work in very rare instances. In most cases, I find that using a delta for every component is indeed overdeveloping the expectations. I personally use a 10 year rule. If someone will have to go in and modify my code for data expansion expectations within the next 10 years to deal with volume vs. hardware upgrade expectations, I overdevelop to allow for the expansion. Otherwise: KISS. 10 years is (usually) more than enough to allow for business changes to already have redeveloped any particular component twice, and it can be dealt with then should optimization be considered more valuable than development time.
When in doubt, XKCD is my best friend for this: http://xkcd.com/1205/
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