vote: unethical (though understandable)- just let it be what it is. I did a record for a guy who can't sing to save his life, the music and the mix sound great, but I don't include the material in any of my demos. I did autotune more than he knew (or he would admit to), but he knew it was part of the deal and wanted to do whatever it took to make it as good as possible.
I had a bass player friend who did a demo deal for a major and the big name producer had a session bass player come in and replay his part and my friend was the guy who wrote the song, talk about a kick in the teeth... (he wasn't that bad either)
I personally wouldn't do it unless the person was sucking up a commercial product and even then I would probably be upfront about it. It's a sad fact that a lot of "musicians" ignore their instrument for their image and a fair number of bands who get signed are not good enough to cut it in the studio, all tricks and studio magic aside.
Speaking of bass players in studios and unverifiable anecdotes
, I also know of a very huge and cool record by a metal band that had all (or at least most) of the bass lines played on a keyboard because the bassist was a better keyboard player than a bass player... I would never have guessed, but once told I can kind of tell now, but really it doesn't make the record any less cool.