Regarding bitcoin not being a settlement system, there is a reason why Satoshi did have 10 minute blocks and I wouldn't want to second guess his motives. If it were designed to be a real-time processing system it would have been designed differently, see Bitshares for an example of using a consensus algorithm that allows for real-time processing with faster block times.
I accept zero confirmation transactions at my brick and mortar store and it works perfectly, people can also use payment processors for instant transactions as well of course. Satoshi did most definitely support larger blocks, and in regards to you saying he envisioned Bitcoin to be a settlement network and not a payment system, I do not think that is the case after all why would the title of the whitepaper be
A Peer-to-Peer Electronic Cash System. I think that Bitcoin is both a payment system and a settlement network and much more, we should not restrict its use if we have no good reason to do so. Bitcoin is both a commodity and a currency just like the gold and silver coins of ancient times.