If you're getting a 5% real return, then it doesn't matter how much fractional-reserve banking is involved; it's still a waste to put the money into planting trees at 2.3%. Changes in the money supply just make it much more difficult to determine what the real return is; this impacts the estimated return of the tree investment just as much as everything else. That $1000 you're expecting to sell the tree for in 100 years may be worth less than the $100 you're spending now to plant the tree.
Your still asserting that interest is caused by the return on investment of capital and thus the interest rate reflects currently available investment opportunities that have that rate of return. If this was the case why doesn't more money get directed to these investments saturating them and dropping us down to the next tier of investments and a lower rate and eventually to zero? Clearly their is some floor that gets hit to prevent remaining investments from being funded because their are always a broad spectrum of opportunities available. myrkul has argued this is due to time-preference in which peoples short time horizons cause them to forgo a longer term investment.
Further more your argument breaks down as soon as investment that is not for the purposes of investment is added to the picture, GC gave some examples which are some what inflammatory and I think distract us by bringing in banking practices that are not necessary. Lots of lending is to non-investment activity without it being fraudulent. If a lender can lend to someone in need of some money to cover an immediate expenditure that their savings don't cover (lets say a Root-canal) at 5% then they will do that first. So these non-investment loans will 'pollute' the pristine investment-as-the-cause-of-interest-rates scenario your presenting. I maintain that liquidity value of money is going to act as a floor for interest rates and simply cuts off a large chunk of possible investments.