That said, 1MB is really small. I'm trying to envision a world-finance-dominating network with 1MB blocks every 10 minutes and it's tough.
What makes you suspect it's tough because of the blocksize? Maybe it's tough because it's just not something you'd be very good at, for a multitude of unrelated reasons.
Perhaps a better question then I'd like to ask people here is: The year is 2015. Every block is a megabyte. Someone wrote a new big-block client fork, and people are switching. What will you do?
I've asked MP. While nobody can really know the future, turns out what we'll likely do is start an entirely new coin, this time guaranteed to never be hard-forked; not by a bunch of coder nobodies, but by MP himself. In practice that'll most likely work out to simply staying with the old version and replacing some code monkeys. This, mind you, not because we really care all that much if it's 1 Mb or 100 Gb, but because the precedent of hardforking "for change" is intolerable. We'll find ourselves in due time under a lot more pressure to fuck up Bitcoin than some vague "I can't manage to envision the future" sort of bs.
An alternative theory I present is: if some hardforking change is so valuable, why couldn't an altcoin prove that value and earn its place in the free market and eventually supplant the inferior alternative?
An excellent question. If y'all are going to be dicking around with hardforks might as well do it on whatever devcoin nobody cares about, watch it continue to be resoundingly not cared about and draw the logical inference from there.
The transition to ASIC mining should represent the last step increase in hashing power
Nonsense. The only group that shipped one (some?) asics is using 110nm tech. We are at the beginning of a curve, not at the end of it.