I've been thinking about this further:

Surely the argument about DataReaders isn't the cost of opening the connection, it's the fact that the connection lives much longer and hence reduces scalability?

One could make the argument that in fact getting a connection, getting you data, and getting off as quickly as possible, is much more important than the efficiency of DataSet's or otherwise at the middle tier. It's generally a lot easier to scale out the middle tier than improve the scalability of the database.