After reading lots of blogs, forum entries and several Apple docs, I still don\'t know whether extensive subclassing in Objective-C is a wise thing to do or not
Please read the Apple documentation "Adding behavior to a Cocoa program"!. Under "Inheriting from a Cocoa class" section, see the 2nd paragraph. Apple clearly mentions that Subclassing is the primary way of adding application specific behavior to the framework (please note, FRAMEWORK).
MVC pattern does not completely disallow the use of subclasses or subtypes. Atleast I have not seen this recommendation from either Apple or others (if I have missed please feel free to point me to the right source of information about this). If you are subclassing api classes only within your application, please go ahead, no one's stopping you but do take care that it does not break the behavior of the class/api as a whole. Subclassing is great way of extending the framework api's functionality. We see a lot of subclassing within the Apple IOS framework APIs too.
As a developer one has to take care the implementation is well documented and not duplicated accidentally by another developer. Its another ball game altogether if your application is a set of API classes that you plan to distribute as reusable component.
IMHO, rather than asking around what the best practice is, first read the related documentation thoroughly, implement and test it. Make your own judgement. You know best about what you're up to. It's easy for others (like me and so many others) to just read stuff from different sources on the Net and throw around terms. Be your own judge, it has worked for me so far.