Re: Increasing blocksize dynamically w/economic safeguards - the ideal compromise?
There are no mandated fees in the Bitcoin protocol so the natural response to schemes like this is for miners to simply accept fees via other means (such as the direct txout method supported by eligius since 2011, or via outputs with empty scriptpubkeys, or via out of band fees) and give users a discount for using them. The expected result would be fees migrating out of the fee area, and protocols that depend on them (like your suggestion) becoming dysfunctional. 
Hi greg, thanks for taking a look at the idea.
The issue you highlight is why I had the idea to exclude zero/far below mean fee transactions from calculating the fullness of blocks to justify an increase.
Therefore there would be no benefit to the miners who want to accept fees out of band in an effort to avoid paying for a vote to increase the block size, as increasing the block size would not be possible unless the blocks are sufficiently full with transactions that are paying a fee.
This transaction doesn't change the fundamentals of Bitcoin - fees are still not mandated, there is no penalty for including zero fee transactions. Its just that if there are a large number of transactions in blocks that are paying fees substantially below the mean the block size cannot grow, just as it can't anyway at the moment.
I hope what I'm trying to say makes sense. Do you think this could help mitigate the out of band fees problem?