The general challenges with designing WoT systems as I understand them are:
1) To make hard to create clones
2) To make hard to hurt reputation for no reason
3) To rely as little as possible on anyone else but yourself
cyberagorist shows that general purpose WoT's are doomed and proposes for a set (network?) of single purpose WoT's.
Almost. I think the single purpose "does he obey his contracts" is the central question of a reputational system. It is itself as general purpose as the concept of a contract. 1) To make hard to create clones
2) To make hard to hurt reputation for no reason
3) To rely as little as possible on anyone else but yourself
cyberagorist shows that general purpose WoT's are doomed and proposes for a set (network?) of single purpose WoT's.
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Also proposes for a "with arbiter"-style network which IMO we already have today in real life with threats from government, judges as arbiters and blacklisting as having a record of serving a prison.
But this proposal misses the point IMHO as WoT is exactly that - web. Decentralization and disintermediation from judges. Who are basically are no longer your peers and you get a classed society with all the consequences.
But this proposal misses the point IMHO as WoT is exactly that - web. Decentralization and disintermediation from judges. Who are basically are no longer your peers and you get a classed society with all the consequences.
Not at all. Everybody is free to work as an arbiter. The only "qualification" of the arbiter is the agreement of the participants to accept this particular arbiter for their particular contract.
But, in fact, there is no way out of arbitrage. If you want to obtain nontrivial information about "X has violated a contract", you cannot wait for confirmation from X himself. Nobody will blacklist himself.
So, you have to rely on information from others. But, then, how to make it hard to hurt reputation for no reason? Or you have a separate class of people allowed to blacklist somebody, which is independent of X himself, that means, some class structure or centralization, or you make it dependent on decisions X has accepted himself.
The second type is what is used in my proposal. There are no centrally accepted trusted arbiters. The arbiter is an arbitrary person trusted by X himself to be fair.
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The proposal for have a way to trust arbiter is something like overlaying another WoT on top of it.
Not another one, but the same one. Each arbiter accepts, volitionally, other arbiters to judge about his contracts and terms of service. These are also not some sort of a second class of higher arbiters, but, again, every person trusted by the abiter himself can be used.
And, so, there is no hierarchy of arbiters, but a network: A general directional graph, where every node has at least one outgoing edge to an arbiter he trusts. In particular, there will be loops in it.
Don't be afraid of loops - the terms of service may and will clarify that, at some point, the next arbiter is already unable to change the original decision of the first arbiter, but can only penalize or destroy the reputation of the first arbiter.
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I believe WoT must be way simpler and exclusively peer-to-peer.
It is. The arbiter is a peer of the guy who accepts him. BTW, if you trust the partner of your contract, you can accept him as the arbiter for the contract too. And he can accept you as his arbiter. So a simple peer to peer reputational system would be possible as a special case.
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To make hard to hurt reputation for no reason there clearly must be some cost to do so. In case of bitcoin economy - see first word 
You should pay to change someone's reputation.
So or poor victims appear helpless, or rich people can destroy your reputation for cheap. You should pay to change someone's reputation.