Contract grant writing can be profitable because strong results can mean millions of dollars for the organization you're working to support. My Elks lodge has a guy write grants for us that brings in about 100-150k a year in support for our efforts, just in his spare time. He evaluates grants for the State of NY as his day job, so writing the grants for us is pretty easy for him.
Mrs Axe has a full time grants writer at her non-profit job. This person gets a full time salary, does next to no work, and has never (in three years) won a single grant. That is the level of talent you're competing with. The bar is low. It seems like marketing the service to a non profit that was dependent on results (pay me $250 to apply for a 250k grant, and $10k if we win) would represent a win-win to the client.
The work I got originally was from a non-profit that had fired their "grants writer" because they didn't have the money to fund her position.
I wrote about ten of these things, and won on 3 of them. Most of them were very small, in the $60-200k range. I didn't think that was a particularly good return rate, but after reading your post, I think I can see why my friends were a bit upset when I went back to "a real job."
I had zero experience at this, I learned to do it through Google U.
The previous "professional" grants writer was awful. Her writing was so bad I couldn't even "cut and paste" it without a massive re-write.
So you may have a point about the skill level of people who do this "professionally"- at least at small non-profits.