Smaller botnets add to the security of the network, Botnets are a finite resource and if mining with them is so profitable because they get cheap coins more botnets will join the network until the coins are no longer cheap (a combination of botnets getting scarce and the difficulty going up), and
Afaik, I was the person who originally had that same insight several months ago.
This point was made years ago in the context of Bitcoin, but I'm sure it has been rediscovered many times.
However, that doesn't necessarily apply while the supply of botnets is 10s - 100s of thousands (or even millions) and the totality of non-ASIC altcoin mining is 100s of thousands.
I seriously doubt this latter number since approximately 100K is on Monero alone, and Monero is a modest if growing part of the altcoin universe.
EDIT: It could be in the high hundreds of thousands, it is low 100Ks that I doubt. Given the likely efficiency factors between dedicated miners and botnets this translates to botnets of millions. Or to put it another way, we are likely close to the point, if not there already, that botnets are not a major (security) threat. I leave open the question of economic theories.
Furthermore this entirely ignores all of the factors that separate one botnet machine from one dedicated miner. Duty cycle if nothing else should be at least some significant factor. You mentioned a countermeasure of "just mine on one core" but that obviously reduces capacity significantly.
What is that? Mix coins? I already had someone report to me they tried and failed. That was only 1 report though.
Mixing works just fine. I've used it dozens if not hundreds of times.
The block chain scaling can't be fixed.
"Can't" be fixed is a bold statement. Care to offer proof of that? Because there are ideas being developed for doing just that (that might not work).