The only money to be made now is in selling miners, not in mining!
Kind of reminiscent of the gold mining days in California in the 19th century. The people who made the most money were the ones selling mining equipment, mules and horses and wagons, clothing, food, liquor, housing and sex.
On a different note, a newb question: I don't understand why more miners means more difficulty. Do they compete with each other somehow? I thought the difficulty would be just how hard it is to find a block and verify it.
Yes they compete with each other. And with $BTC intending to be solved every 10 minutes...more miners = more chances to be solved under 10 minutes = difficulty raising to make it back to 10 minutes.
That's the short answer.