When it is all said and done, war medals are awarded to the individual and not to the broader community. They are private property and can be bought and sold. If this offends people then those people need to rethink the process in awarding medals for valour. If medals are public property that cannot be bought and sold then there needs to be a caveat in the awarding of the medals in the first place that states that the medal is to be displayed in a public place for the viewing pleasure of the masses.
Personally, I would hope that medals such as the Victoria Cross which is awarded for "... most conspicuous bravery, or some daring or pre-eminent act of valour or self-sacrifice, or extreme devotion to duty in the presence of the enemy" would be displayed in a public place like a museum so that all people can learn about the bravest of the brave, those who have laid everything on the line not for a shot at fame or glory or riches, but rather in the defence of freedom and democracy as we know it or simply to save the life of a mate in battle. That said, I cannot see a valid reason why a museum should not buy the medals themselves.
If the museum cannot afford to purchase the medals then they either need a special fund provided by the government for this purpose or work together with wealthy benefactors in the purchase of this memorabilia.
The reality is a simple one in that there would be no sale if there was no demand. Simple economics tells us that this is all about supply and demand. The demand is there and if you can supply something to fill that demand and get a price you are willing to accept into the bargain, then why not?
Let's face it, if you can sell a war medal, or an Olympic gold medal, or something similar for 500 thousand dollars and that would set you up in terms of paying for something that you need then who should prevent you from ding that. It has been reported that Shirley Strickland, one of Australia's greatest Olympians, sold her Gold medals to pay for her grand children's education.