Sorry for not updating this post earlier i needed to get my hands on a camera. Four business days after calling Lee a new expander plug showed up in the mail. The machining and finish on the replacement expander is much nicer than the original (prior to polishing). To the naked eye there are almost no machining marks, very similar to the pic from Lee's website (see the middle of page 1). When I run my finger nail across the machined end of the plug I can feel light machining groves. It's not polished but well machined. By comparison, the old die came from the factory with a surface that looked like the surface of a record with regular, deep, spiraling grooves.
In use, the new expander plug feels just like the polished one. You get a very light snap or pop as you lower a cartridge from the die. On the original die, there was a very noticeable bind/tug when your removed the brass, almost like using the factory crimp die. I noticed that with the same adjustments the new die plug expands the case mouth about an extra .001" which is to be expected being that I sanded and polished the old plug. After expanding 50 cases I noticed some light brass residue on the tip of the expander. Surely caused by the plug's slight machining marks. I inspected the expanded cases and couldn't find any scratch marks or brass shavings on the press.
It's obvious that not polishing the expander plug is cheaper for Lee but it might also help people who dispense powder through the expander die as a slightly rough surface on the expander plug might serve to jiggle powder in the hopper. Since I use my powder measure separately from the press, I'll probably polish the surface of the expander plug but that's just because I'm anal retentive and I love to play with my polishing wheel.
Long story short... No, you don't need to polish Lee dies under normal circumstances but their QA isn't the best and if your new expander die scratches the inside of the case mouths you should inspect the plug and possibly contact Lee for a replacement. If you want a silky smooth expanding operation a little polishing will be necessary.
Attached are two pictures. One is a close up of the new plug after expanding 50 rounds, and the second is a comparison show between the old (now polished) plug and its replacement. Unfortunately, they aren't that great pics because I used the wrong camera settings. Thanks again to Lee for superb customer service. Cheers!