Exactly what block size the network can support is very much debatable. I currently think that 10 MB would be fine and 50 MB would be too much, though these are mostly just feelings. There should be more rigorous study of the actual limits of the network. (Gavin's done some nice work on the software/hardware front, though I'm still worried about the capabilities of typical Internet connections, and especially how they'll increase over time.)
Exactly. 30 kBps upload is common in Australia, and you sure should be able to run a full node in a typical internet connection in Australia, or Brazil, or Philippines, or whatever. The block size needs to be useful for the (lowest reasonable) common denominator, not the median.
IMO 10 MB is too much, maybe 5 MB.
If you come within 1/3 (and probably much less) of maxing out your network connection, your ability to run Bitcoin is dependent on the government NOT telling your network providers to interfere with certain kinds of traffic. A chain is only as strong as it's weakest link. If Bitcoin depends on this not happening on a fairly wide scale globally at some point in the future, then it is simply not a very strong solution to me. Maybe it is to others. Fine. I'm not going to be putting a lot of my eggs into that basket however.