I am thinking the pool operator (server) does so little relative to work of the pool miners that it doesn't need to charge a very high fee. Thus there isn't much ability (incentive for pool miners) to undercut competitors based on fee.

So there just needs to be a slightest incentive to encourage pool miners to seek out another pool as a pool grows large. This will encourage a proliferation of pools.

How do pool miners know that a pool server isn't cheating them by paying some of the earnings to themselves pretending to be a pool miner?

Go down that line of thought and you will discover what I am thinking.