I used to own a TWH gelding that was padded for a long period of time. We had to teach him how to walk like a normal horse again. This was a long and expensive process consisting of multiple shoeings with the shoe's weight decreasing each time until he could walk like a normal horse again. He was not ridden during this time period because of the stress.
Most people that do that don't care about their horse's health. They just care about how much money they can win off of them. Once the horse becomes so lame that he can no longer be shown, the owner throws him away and gets another horse to screw up. Padding messes up several muscles, tendons, and joints. Padding makes perfectly sound horses lame quick.
IMO, padding is just making a crap horse that doesn't have any good showing potential "better". I have seen and know of some TWH that have that high knee action naturally; my gelding and his sire being perfect examples. If a horse can't naturally perform well, "trainers" and owners will do anything possible to make money off of the horse. This can range from padding, soring, or using chains that are tightened to cause pain and make the horse more flashy and showy. I don't agree with any of it. If your horse can't perform well enough to win, don't attempt to make it "better" by using extreme forms of cruelty and abuse.
My mom, whom used to be on the board for a local horse rescue, wrote a pamplet about this not too long ago. One of the things that she put in there that really stuck with me is this:
"Padded horses are kept in inhumane conditions. They are stuck living in cramped stalls without the ability to just be a horse. They don't get turned out in a field like other horses; they are confined to a stall year round. Imagine if you had to stand in a phone booth wearing one high-heeled shoe all day everyday. That is how a padded TWH lives."