>Am I missing something fundamental here?

Hi Tim, nice name.

For What its Worth:
Not Sure about SQL server but on Oracle and DB2 not using bind variables causes the SQL to be "different" each time which means the database must reparse the SQL. In short using literal values is inefficient. On Oracle this is documented with a very high level of improvement when using Bind Variables (AKA parameters).

Check out:
http://www.akadia.com/services/ora_bind_variables.html

Or search google for "Why Use Bind variables"

For more info.

BR
Tim