I can't quite tell from your bolding which piece you disagree with.
The chain of events
price increase --> mining interest --> increased reward --> price decrease = more stable currency. Which part is incorrect?
coin becomes worthless
Something that is worthless to begin with can never "become" worthless. It is per definition already worthless.
Also, I don't see the point in every Tom, Dick and Harry coming up with a new coin every day and a half. It's incredibly stupid and pointless to have 10.000 1:1 copies of Bitcoin, Litecoin and PPCoin.
Stahp eet.