It has to do with how it is not about music as a cultural or creative force, but entirely about the manufacture and commodification of music and people as brands. The purpose of the competition is not to pick who is the best singer, but which one is the most palatable and marketable. It is the world's largest focus group with ads.
In this way music no longer becomes about individual creative talent but about increased product awareness and the fantasy narrative of "achieving the dream". The contestants aren't asked to write or compose music, merely to regurgitate songs that have already been proven hits as closely as possible.
The reason it is vile to put "Working Class Hero" on there is not that it is exposing the anti-corporatist song to a new audience, but that it in fact undercuts the message and meaning of the song. It, like the people and songs processed for mainstream consumption, simply becomes another thing to sell, another thing to buy. Like Green Day, it becomes a pre-packaged attempt to sell anti-consumerism. The buyer becomes unaware that by trying to subvert the system, he unwittingly becomes a participant in it.