I haven't read this thread much at all, so maybe this has already been said, but I've been noticing a lot of people saying things like, "If the block size isn't raised, then that would be bad because ..." But just wanting larger blocks isn't a good argument for increasing the max block size. By far the most important issue is what the network can support. We're just going to have to learn to deal with the fact that the network's capacity is limited and fees will probably always be larger than people want. (However, I do believe that the network could very likely support 10 MB blocks right now, though probably not 50 MB blocks, for example.)
Indeed. Which is why Matt's relay system and IBLT are needed, and will massively improve the situation for block propagation. People arguing for 1MB forever ignore this, yet when 20MB blocks finally appear they will take less than 1MB to broadcast through the network. It will only be bootstrapping new nodes and re-sync which will need the full blocks transmitted.
Bandwidth is the limiting factor, disk space less so.
You proposed increasing the limit to 2MB in 2 years. This is what should have been done in Feb 2013 when this debate last came up in earnest. Unfortunately, this is now too little too late. IBLT was not considered at that time, but it is something we are aware of now.