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1. Why aren't more people opting out? If they are, then where are the high quality fire services to take the place of the fire department?

The vast majority of firefighters are unpaid volunteers. Furthermore, there is no particular reason to compete with the government when it has a blank check and the power to find a reason to arrest you for attempting to compete. Look no farther than the postal service: A man by the name of Lysander Spooner once set up a competing postal company which was soon much cheaper and of higher quality than that of the federal government; the postal service then had the government shut down his operation. Thus, it was demonstrated that attempting to create alternatives to government monopolies will, if successful, result in being shut down and your profits stolen. Something similar happened to the Liberty Dollar guys, who were arrested, had all of their assets seized by the FBI, and were accused of terrorism by the prosecution. Hell, if bitcoin had a central server, the owners would probably have long since been arrested as "terrorists", too.

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2. Is the opt in solution really better? There are enough people out there that would be willing to opt out, and then they lose their house in the event of a fire. And it's not clear that insurance covered it - I'm sure they had a clause which stated that the insured's property would not be covered if the insured chose to opt out of fire services.

Wow, talk about "straw men".

The fire department is already paid with taxes. Being allowed to opt out does not an ideal market anarchist society make, seeing as how you are still paying the thugs in charge, except this time you get nothing for your money.

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Cops are better than security guys (paraphrased, original post was lost)

Well, lets see.

Police:

-Are given many special privileges that ordinary citizens are not (Examples below)
-Even cops who are not abusive in the slightest have to enforce laws against victimless crimes. For example, if I am not wearing a seatbelt in most of the US and other countries, they will steal my money. If I have marijuana or, worse, a "dangerous" drug in my car or on my person (even if it is a trace amount), I will be kidnapped, tossed into a small room with bars (possibly for days, weeks, months, or years) as other police ransack my house for "evidence of the crime", during which time the more unscrupulous of them will steal my more valuable possessions and will get, at worst, a stern warning if caught.
-If they have "suspicion", they may burst the door down, steal my stuff as "evidence", and shoot my dog. If they don't find anything, I will be unlikely to get any form of compensation for being raided. If they find something (and it could be something utterly inconsequential), they can use it as an excuse to, again, steal my things and kidnap me.
-If I defend myself against the police, either plainclothes or in uniform, I will be considered to be at fault. Even if they are, say, bursting through the door with weapons and no warrant, if I use a gun to protect myself and my property, I will be considered a criminal. In fact, it will be considered to be worse than had I just walked into a mall and shot a regular guy. Even if the police were blatantly violating their own laws, I would be at fault. Keep in mind, many clever and enterprising criminals actually pretend to be the police to rob people, some even bribing cops to provide uniforms for them.
-Assuming the cops are abusive, chances are very high that they will get away with far more than a regular citizen. If they murder me, they can claim I was resisting arrest (something that isn't too uncommon, and is very hard to prove to the contrary). They can excuse just about any of their own crimes and are highly unlikely to ever be prosecuted because there is no alternative to the police. You can call the police against criminals (though police don't really stop crimes, they just catch criminals after the fact unless they are robbing a bank or something), but who do you call against the police?
-This isn't even considering that if I am unfortunate to be, say, a black man in southern California, I will be pulled over for no good reason repeatedly by cops engaging in "racial profiling", and there isn't a damn thing I can do about it. Again, who do you call against the police?

Security guards:

-Are equal to everyone else. This would apply in a Market Anarchist society, so don't give me the "that is because of the police" garbage.
-Have no special privileges and aren't able to rob me or kidnap me in the way police are.
-Are highly unlikely to burst the door down, unless they are regular criminals. If they attempted to do the things the police get away with, they would be in big trouble. Again, this would apply in a market anarchist society too.
-Furthermore, the only things a security guard could do would come down to "restraint/physical force" and "using a gun". Unlike a cop, he wouldn't be able to hide behind his authority and would be prosecuted if he just up and shot me.
-Also, a guard has no motivation to attack me. A policeman might gain status or other advantages by trying to arrest people since he might get lucky and get someone actually breaking the law, and he is unlikely to ever suffer if he is wrong (especially if he goes after the poor, blacks, hispanics, and others who probably aren't willing to go through the process of attempting to get the man in trouble for abusing his authority). Furthermore, he might be looking for an excuse to steal things secretly or to resell drugs he captures. A guard has no more motivation than a regular guy, except that he wouldn't be a guard for very long if he just up and mugged me.
-If the guard scared away people from, say, a store he was supposed to guard, he would be fired pretty fast. Thus, another reason to be reasonably polite and reasonable.

Yeah, it is pretty obvious which is preferable.