Well, I don't have any first hand experience
selling games (yet), but some logical reasoning might be in place.
I can see a few different aspects here.
If you're playing the demo and considering paying for the full version, what would you rather get; just a few more levels, or enougt action that you're likely to give up or put the game away for a while before you run out of levels?
At first, the answer might seem obvious - but I'm not so sure! Finishing the whole game is a big reward. And a great game always has some replay value. I think you're more likely to return to a game that you "dropped" because you finished it, than a game that you dropped because you basically got sick of it.
More importantly, what's better if you plan on selling a sequel?