The block size limit in the protocol will not become an issue until transaction fees become a more substantial portion of mining revenue. As it stands at the moment, there is a market-based soft block size limit that results due to the economic incentives that miners face due to block propagation races. Since transaction fees are eclipsed by the block reward, miners are incentivized to publish smaller blocks with fewer transactions.
Yes this is a problem, but it can be solved by the market by increasing fees to cover the propagation risk to the miners. Furthermore it also creates an incentive to run full nodes as users compete to get their transactions confirmed. This has the overall effect of reducing the latency of the network, thereby mitigating the propagation risk to the miners. In short there are built in economic incentives already to address this problem. The problem with the 1 MB limit is that it is arbitrary and not related the costs incurred by the miners or the rest of the network, so no amount of fee increases or reduction of risk by adding full nodes will address the fact that a certain number of transactions will not get any confirmations.