I think the big objection for some roleplayers to the Auction House is that items can be posted in, say, Rohan, and be bid on by somebody in Bree seconds later. The idea of the auction house per se is not Lore-breaking, just the way the in-game one works.
Personally, I do not keep my roleplay characters in-character at all times, so I have no problem with using the Auction House. However, some people spend their entire time on LotRO roleplaying, so they try to avoid things that simply could not happen in Middle Earth.
Gimli's First Law of "Let's go!"
"Certainty of death? Small chance of success? What are we waiting for?"