The event, which is held on National Park Service property, was recently denied the required Park Service permit for the 2012 race

seems odd that they could get it in years past but somehow WTC failed to secure it this year.

Is it just me, or does it seem unethical/ridiculous to take people's money before having the appropriate race permits? Is this a typical practice or a result of this race's proximity to DC?

I did this race last year and decided it was not worth doing again. It ended being a lot of money for lots of pre-race hassle and a race itself that felt hastily designed.

At some point last fall I received a mass e-mail from the race director asking me to sign up again. I wrote back explaining why I wouldn't, and the director, to his credit, responded. But he emphasized the "premium product", the destination race, and some pre-race changes they would make. I appreciated the communication but it did not change my mind. I wonder how many people felt as I did, and if this had anything to do with the race cancellation.

This is exactly why I only sign up for races that are:
1) Have been already longer than my participation in triathlon
2) Run by guys/gals that know their $hit.

Not sure if it is indeed permit related, but I don't understand how anyone can sign up for a race before the race course is announced or permits received.

I believe the DC TRI is run by Washington Sports and Event Management Company not WTC (see bottom of the DC TRI home page). I believe it is an example of a licensed race versus an "owned and operated" event. I would also suggest that most event companies take money before permitting is finalized. Most cities or towns wont actually issue a permit that far in advance so they come to an agreement or "memorandum of understanding" and issue permit later on. I am sure there is more to the story than meets the eye. Just my thoughts.

According to Carol Johnson, a spokesperson for Washington's National
Mall and Memorial Parks.
The permit was denied because it was in violation of the park's policy not
to hold any foot races between the Memorial Day and Fourth of July
holidays. The parks had made an exception the past two years.
"Because of a number of things going on in the parks this year, it was
necessary to enforce the policy. It had nothing to do with who applied for it."

Some of the people at the Parks Service are A-holes...one park ranger sat at the finish line at a race on the C&O canal and counted the number of people crossing to make sure the number on the permit wasn't exceeded.