I agree with Gavin, and I don't understand what outcome you're arguing for.

You want to keep the block size limit so Dave can mine off a GPRS connection forever? Why should I care about Dave? The other miners will make larger blocks than he can handle and he'll have to stop mining and switch to an SPV client. Sucks to be him.

Your belief we have to have some hard cap on the N in O(N) doesn't ring true to me. Demand for transactions isn't actually infinite. There is some point at which Bitcoin may only grow very slowly if at all (and is outpaced by hardware improvements).

Likewise, miners have all kinds of perverse incentives in theory that don't seem to happen in practice. Like, why do miners include any transactions at all? They can minimize their costs by not doing so. Yet, transactions confirm. You really can't prove anything about miners behaviour, just guess at what some of them might do.

I don't personally have any interest in working on a system that boils down to a complicated and expensive replacement for wire transfers. And I suspect many other developers, including Gavin, don't either. If Gavin decides to lift the cap, I guess you and Gregory could create a separate alt-coin that has hard block size caps  and see how things play out over the long term.