I personally can't say anything about the legitimacy of these arguments. However, it does seem, to me, there are a few grumblers about the 'representativeness'.
There is also a broad academic theory called 'Orientalism' by Edward Sa'id about how the ability to represent others in the way you choose is a form of power:
http://en.wikipedia.org/wiki/Orientalism
this post is going to sound a bit rambling, so i'll apologize in advance. i just don't feel like putting too much thought into this.
anyways, i'll say right off that i thought slumdog was better than benjamin button. the story was fast-paced, well-edited, and - although it was a rather typical love story - managed to fit in so many original elements that it never felt contrived. benjamin button was good, but it was a bit too long, was an underwhelming adaptation of a story, and reminiscent of forrest gump (same screenwriter).
as to its offensiveness - i think it's about 50-50. many of my indian friends recommended it, if only b/c A.R. Rahman's song at the end; and if any of my friends didn't like it, they haven't told me. a few months ago i browsed an indian news website and readers' comments on the movie ranged from:
1) it's a great love story, go see it!
2) i'm glad americans are getting a glimpse of our movie experiences, bollywood, meet hollywood!
3) omg, anil kapoor!
4) this movie is offensive and totally unrepresentative of our country. people will believe we all live in slums
5) (and if you were a poor person) how dare you call me a "slumdog!"
anyways, my take on it was that it's basically an american adaptation of an indian experience. it's fiction, and an american attempt to see through indian eyes. i've never personally been inside an indian "slum," but i've been in similar ones in different parts of the world. i would say it was pretty accurate, aside from the violence and abuse (one at least hopes). i can see how some people from india may not be too keen on the idea that one of america's greatest hits happens to be on their slums and not of their beautiful assets, but that's assuming the people who are watching are not cultured in any way.
anyhoot, it doesn't surprise me it's won a lot of awards. some people like it, some people hate it, and for an array of reasons. i personally enjoyed it, but it's always a good idea to know what you're watching before you see it.