I'd rather have 10 persons running a full node and sharing the cost then have thousands of people using some third party services to make their transactions. As of now, the size of the block chain is controlled by a limit on the block size and by the level of difficulty to mine a block, the value of the second paramater can change depending on the network's hashrate but the value of the first paramater can't change because of the risk of a consensus problem. The system we have now benefits to speculators but does not benefit to the real users of the currency, if bitcoin isn't used as a medium of exchange then sooner or later the price of the coin will drop down to zero (or it will fall drastically to it's true value).
Unfortunately, that isn't what really many people wants. There is nothing wrong with increasing block size, but if you were to increase to that extent, then no one except a selected few can run a node because they are prohibitively expensive. Miners can only mine if they're fast enough, which would mean further centralization as they need to achieve the lowest latency possible to reduce orphans. Complete centralization of Bitcoin defeats the very purpose of it, and putting the control of it to a selected few only serves to discourage people from using it.
There is nothing wrong with increasing the block size to increase the on-chain capacity. However, if you want to achieve mass adoption and surpass that of the major banking systems, you can't do it without making it impossible for the average joe to run a node. There is no way this should ever happen, because we'll be at the mercy of whoever is running the few nodes.
I briefly read through the topic again. Are you still proposing a complicated dynamic block size as opposed to a simple and linear block size increase?