I have observed this as well. Updates after the gate opens can be dramatic and unpredictable and seem to have gotten worse. With that said, I don't care as long as no one is getting an unfair advantage in terms of rebates, pool visibility, quicker access to tote feeds, etc. I have no way to confirm or refute this so can't get caught up with it mentally.
Here's how I accept this situation:
1) If I'm on the horse that gets bet down and your presumption is correct that these horses are more likely to be winners, than I likely underestimated the true win probability to begin with.
As an example, let's say I bet a horse who is 4-1 but I think should be 3-1 (25% probability ignoring takeout) based on the information I have. Now the horse gets bet down to 2-1 (from the 4-1 odds). How do you know that the horse shouldn't have been 2-1 and I underestimated his odds? The real problem I think you're encountering is that the handicapping has gotten better (favorites are winning a higher percentage of races) which is depressing payoffs
2) In the opposite situation, if the late bettors are wrong (which per your assertion is the minority of instances) and I'm on the winning horse, my odds just got better so I should be happy?
