I may have taken you a little too literally when you wrote that you didn't understand the problem. Perhaps what you're saying is that the conclusion is not repugnant to you and that the conclusion is neither counterintuitive nor ethically problematic.
Consequently you believe that it is better for a large number of people to exist in a state barely better than misery than for a smaller number of people to experience a greater degree of happiness.
I suppose that is a fair characterization. I would say that I still think it's tautological. Obviously it's a synthetic situation that involves infinity, so real-world applications are difficult to evaluate.
But I just don't get why people see it as an ethical dilemma – the conclusion is a perfectly sensible outcome of the setup. The conclusion is just a restatement of the premise – a maximization of population over a maximization of happiness. Thats why it seems tautological to me, the math of it is perfunctory and reveals nothing. If you cared about maximizing happiness more than population you would have to modify the setup. The trade-off is built into the premise.
Consequently you believe that it is better for a large number of people to exist in a state barely better than misery than for a smaller number of people to experience a greater degree of happiness.
Fair enough.