Okay let's try this on for size:
Why does PAAVO work? My answer would be because of its emphasis on high end aerobic work during the pre/offseason, and its emphasis on high mileage. A long run and a whole lot of tempo runs? Hell, I do that for a month or two before every season, and I consider myself more of the Lydiard school than anything else. Most high schoolers do not properly develop their aerobic systems, and PAAVO forces them to do so, thereby coming into the season very fit. Then they start with slower intervals (correct me if I'm wrong, I've never done PAAVO myself), and later move into fast intervals. Here's a little chart I've drawn:
Base -> Tempo -> Slower Intervals -> Faster Intervals
At its core, it's pretty simple. Jack Daniels often has sets of R pace 200's during early parts of the season, for the purpose of stimulating turnover. I think this is similar to Lydiard's focus on a hill phase. PAAVO simply takes that type of fast repetition and turns it into a fast mile during the pre-season.
There are two real problems with PAAVO:
1. Lack of recovery days if you run all of your runs at the suggested paces.
2. Two much emphasis on following the schedule with zero deviation.
Consider a hypothetical high schooler: He can run 5:45 pace for his short PPM, and should therefore be running 6:30 pace for his CT the next day. That's pretty quick, no doubt, but manageable. Now consider Colby Lowe, the best (current) example of PAAVO success. I would guess he can run around 4:50 pace for his short PPM(?), so he ought to be doing his daily runs at 5:35 pace. Now don't get me wrong, the kid is amazing, but I think even the ballsiest elite distance runners probably don't go that fast on ALL of their daily runs. My point being, the more successful you become, the more you probably ought to alter the system. High school freshmen who don't know pacing can definitely benefit from being pushed to go harder every day, but faster guys who haul ass on those tempos will probably be better off with a somewhat slower day (i.e. PPM pace +1:15 or more).
The second issue is as much a coaching issue as it is a problem with PAAVO. PAAVO is not perfect. Lydiard is not perfect. Daniels is not perfect. It is your job as a coach or runner or both to distill the principles of any system and apply them as you see fit. Not all 800 runners can do 100 mile weeks with 22 mile long runs in the offseason. This does not make Lydiard an idiot, or make Peter Snell a bad example as an athlete. PAAVO is not used in its pure form by elite athletes because if they raced a 4 mile PPM, they'd hit 4:20-4:30 per mile and have to attempt two months with no run slower than 5:15 pace. So ask yourself, what is it about PAAVO that brings success? Attempting to do PAAVO training does not make you stupid, but simply taking it as an all-or-nothing proposition and never trying to understand it does. I think the long and short pre-season tempos are a great structure, and I use them myself. Also the lack of emphasis on tapering has led to good results for me, as well as others.
PAAVO followers do tend to be somewhat cult-like, which only leads to animosity on both sides, and hinders an actual discussion of the training principles involved.