True that new buggy releases can make your game lose players. At the same time, more players means more testing. More testing means more bug fixes, which means more stability and thus higher quality.
Also, I would argue that by having less releases, you end up loosing players. People that search the net for these types of games don't look for games they can compile themselves. They want to DL, install and play.
And then they probably want to mod and create! They dont want to get into the hassle of compiling if the only thing they want to do is tweak some xml.
Some might be inclined to wait for the next release for their awaited feature but some just won't and will quit or move on (or get fed up when they see the next release is not coming).
Take GAE for instance, I can easily find only two download links, one for GAE 0.3.2 (which dates back to end of oct. 2010) and GAE 0.4 Beta 1 (which dates back to april 2011). Both are rather old. If someone is still waiting on some feature, and doesn't want to start compiling 'cause say they are nowhere near familiar with coding, well...
A year is a long time to wait for a feature.
Releasing buggy software is a reality of software development, you just can't catch them all. How many testers do you think Blizzard/EA/Activision/Other have to test out their games? An army. And they still are able to release buggy piece of s***. Preventing a release for an open source community is just adding a nail to the project's coffin imo. Let the community test it, sure you'll discourage some, but if you have a good presence on the board, and fix those crashes/bugs fast, you should still be able to grow your player pool.
The only thing I would say about daily builds is that it would probably eat up Hardware space quite quickly (sure you can delete old ones but its always a pain, keeps coming back at you with a hunger for flesh.... arrgghh!). I would suggest monthly builds or something.
My 2 cents.