So my new suggestion is: Set a safe upper limit on the number of transaction outputs per block. Blocks with more outputs would be invalid and rejected by the network.
Actually, an improvement on the last suggestion.
Determine an acceptable (given technology) rate of growth of the total set of unspent outputs. Every 2 weeks, adjust the number of (new unspent outputs created - previous unspent outputs spent) allowed per block, based on how closely the maximum rate of growth is being tracked.This makes the size of all unspent outputs a resource that is subject to an economic feedback loop, just as we already have (in theory) with the total size of each block. That minimizes transaction fees without ruling out legitimate transactions that look like dust (micropayments).
Miners could pay users to spend lots of dust outputs, since it allows them to include more unspent outputs (which they can charge for) in their block.Yes and No, Yes there should be a high limit to prevent spam,
but also there should be a lower limit on the amount of satoshis you could send to a EMPTY address,
a spammer can use have infinite number of empty addresses to bloat the blockchain with 1 satoshi transactions
but he can only have so many addresses with a balance in it!
thus forbid transactions that send less than x satoshis to a address with 0 satoshis.
If this transactions have multiple outputs, just look the one's that are empty and send the amount back as change.
This will make everyone want to have at least x btc in his/her address and not spamming the address space with almost empty addreses.