Do they honestly think that there is a better chance that I want one of those 3 options as opposed to the other 16?
Yes. Because the applications *remembered* that you used those options recently/frequently, and are therefore more likely to use them again.
The options that are hidden all haven't been used for some time (IIRC correctly, two weeks for the XP personalized start menu)... So you're less likely to use them than the ones shown by default.
Especially for inexperienced users, hiding the clutter they won't use anyway will greatly simplify the basic operation of the program, and make it easier to use. Others that know what they're looking for anyway may find it better to disable the personalized menus... But the idea behind the hidden menu's really isn't so backwards as you make it sound.