@sozobe,
Conditions in different shelters, including wherewithal for treatment, varies widely, and the descriptions in this letter aren't especially representative of either of the large city shleters I've been associated with. Granted, both in Seattle and Madison, we've been well funded, have had a solid volunteer base, and have had the capability to provide decent veterinary care.
Cage Agression
Most of our dogs do not become cage aggressive -- and we don't destroy dogs for this reason alone, as it is not (one hopes) relevant to what their post-adoption lives will be like. I think there are a couple of reasons for this. One, our dogs get a lot of social contact -- each dog is taken out to a play yard in the morning and evening (unless weather conditions prevent this) and are walked multiple times throughout the day by volunteers. Two, our shelter is designed so that kennel doors don't face each other. Most other shelters house dogs so that kennel doors face each other, and, understandably, dogs can develop hostility toward the dog across the way and, by extension, toward other dogs. Cage aggression does not at all mean that animals will be aggressive toward other animals outside of the cage. If dogs do show some aggression toward other dogs when not confined, we ensure that they are adopted to homes where there are no other dogs present, and make sure that adoptive owners are aware of behavior that has been observed and the ramifications for the dogs future (for instance, trips to the dog park are probably a bad idea). Uncontrollable aggression toward other dogs is generally rewarded with euthanasia, but we do our best to work with our foster community and with breed rescues (where possible) to rehabilitate.
Aggression toward humans, on the other hand, is not tolerated, which has actually been something of a public relations snag at times (though not as problematic as adopting out dogs who are likely to bite people would be).
Kennel Cough
Yes, we do have a lot of kennel cough at our shelter (and upper respiratory infection in cats). Dogs showing signs of kennel cough are placed in an isolation wing and treated with antibiotics for two weeks -- as much to reduce the spread to other animals as to treat the kennel cough in itself, which usually resolves on its own in otherwise healthy animals. If these animals were already available for adoption when they started to show signs of respiratory infection, they will continue to be available, though precautions are taken re: transmission to other parts of the shelter and adoption into a household where dogs already are present. The big expense for treatment of kennel cough is not the antibiotics -- we treat with generics that only cost a couple of bucks a day even for a very large dog -- but the cost of housing the animal for a longer period of time. Demand for dogs is high enough that we never euthanize because of respiratory infection. Unfortunately, I cannot say the same for cats.
As For Other Shelters...
Well, like I said, all shelters are different. Many are not fortunate enough to have our financial and personnel resources, and many serve communities where supply of shelter dogs far outstrips demand (as is our situation with cats), and difficult decisions have to be made. I know that shelters at comparably sized cities in the California central valley, for instance, have to destroy many times that number of dogs that we do every year. Every community is unique in terms of the particular problems it faces.
As For Accidental Puppies...
As far as I'm concerned, if the pup is going to end up in a shelter anyway, by all means take it in. The only caveat to this is that when we take in litters of puppies they are almost sure to be adopted (and quickly, if they're not pit bulls) and we usually are able to convince the owner to let us spay the mother for a nominal fee. If they never come in contact with us, there's a much higher likelihood of another litter down the line.
As to problems with the critter -- separation anxiety and the like -- there is absolutely no guarantee that animals who haven't been through the system aren't going to have these problems. Every puppy has the potential to be a disaster. On the flip side, you can go to a shelter and find an adult dog who's already been through housetraining and their terrible twos (which, in my experience, usually peaks around a year of age in dogs).