Yes, if you surrender, you still lose points.
Andy, don't think of it so much as poor sportsmanship... I prefer to think of it as if you were playing a game of Poker, and you fold, because you know you're not going to win.
Now, me personally, I never used the Surrender button when it was an option, but I do know some people who did use it and are still playing on the site today. I just think that it was a good idea to begin with that needed a bit of tweaking.
Besides, if lack brings it back, and it turns out to be a disaster, he can always jsut take it out again.