Gamblers don't choose where to play, because of the fees (or rake, or house edge, etc)... they choose to play because of the games being offered... the rake is secondary.
If fees were the primary choice to choose where to gamble? Everyone would be playing at Seals With Clubs. (referral link in my sig below

)
-- Smoov
Both are factors.
As I said, fee pressure would be enough to keep the volume from taking up all the transaction real estate.
I'd be willing to bet on that

Raising the block size much more poses very real problems in terms of storage and bandwidth, and I don't think it's necessary at all.