The best designers care about how the design helps you make more money or get more customers.
Should a site look good? Absolutely. It never hurts anything to look better. Can a site look ugly? Absolutely. If your business is strong enough, there's no amount of bad design that can hurt it.
The main thing though, is that more attractive designs don't necessarily convert better. People think they do, because you're turned off by ugly designs, and for sure, if you've got two sites up that share the same interface, and one is prettier than the other, the prettier one will likely win your business. But if you take those same sites, and have better copy on the ugly site, it may well convert better. If your pretty design is hard to use, it may well lose.
So yeah, if your web designer cares more about the end user or themselves than whether the design is effective, then you're paying for the wrong thing.
Speaking from a strictly results-based perspective, sometimes looking better can indeed hurt some user actions. See the recent study on slick, professional ads on Plenty of Fish vs MS Paint ads.
But I'm nitpicking. From what I've seen, in 99% of cases looking more pro helps.
I think, more often, the dichotomy is between idealistic designers and pragmatic designers.
Idealistic designers care about whether the end-users (meaning the people who will, say, visit the website) like the design.
Pragmatic designers care about whether the client likes the design.
It's quite a bit harder to make money as an idealistic designer, unless you can wield conversion rate data at the client. If you're just one designer on a team working for an agency, who's been given a "brand policy" document by the client? No chance.
I disagree with the your dichotomy. It isn't whether the end-user likes the design, it is whether the design is useful. So useful that they don't even realize "design" is taking place.
The good designer knows how to get the client to understand that the end-user is the one who needs to value the design :-)
[Top tip - never ask the client "What do you think of X?" instead ask "What would your customers think of X?". You'll be amazed at the different kind of responses you get.]
You have there, in a nutshell, the difference between the outlook of good and bad designers.
Bad designers care about whether they like the design.
Good designers care about whether the end-user likes the design.