Sorry I don't have time to go through the whole "quote-response" thing right now, but most of your comments can be addressed this way:
First, writing is something I do for fun... it's a hobby. It's not my primary income. Therefore, I am free to experiment with things like e-books, pricing, distribution, promotion, etc, and see what sticks. I'm not making extra work for myself... in fact, the road I'm taking is a pretty easy one. I'm gaining some recognition, and a fan base, both growing, and if it keeps up, it may allow me to ramp up on my hobby and make it a strong second income.
Disclosure alert: Right now, my yearly income from e-books has been in the hundreds. The first year, I barely paid for the website I opened. This year (and I mean just from January 2008), I could have opened up 2 more, and had plenty left over. So I'm making measurable progress.
A lot of that progress is thanks to sites like MobileRead, where people not only buy my books, but they recommend them to others, who go out and buy my books. And word spreads from there. That's a grassroots promotional method, which can work if you have a good product and the right people find out about it. Grassroots tends to be slow, but if it works well, grassroots promotions can graduate to serious projects. In that respect, I'm actually doing pretty well, considering.
Trenian, although you obviously are a fan of free products that generate paying buzz, you yourself are missing an important point: If it's free for the first person, and he can just e-mail the file to people he recommends it to, why will the others pay? If your product is free for one, everyone will want it to be free, and you just gave it away. (You want to help an author: Tell others about it, but don't give away your free copy. Tell them where to buy one. If the price isn't exorbitant, they probably will.)
Now, if the e-book is connected to a printed product that you want people to buy, the e-book can be seen as a free promotional tool. But if the e-book
is the product, it can't
also be a promotional tool. So, until my books are aligned to be promotional items for something else, like printed books, or a partnership with a major publisher, your plan (and Cory's, and Neil's) won't work for me. Granted, if a publisher came to me and offered me a lucrative contract to print books, maybe it would at that point. But I'm not there yet.
Yes, it works for some to use the "donation" method, but for every one like them, there is someone who closes their shop because they didn't get enough to sustain their work. And it's not always quality that dictates success or failure with donations... much of it is just dumb luck. So you can pick either method, and see which works for you. I picked the "pay" system, and it's working for me. If I can get onto a "patronage" or "subsidization" system later, depending on how my popularity goes, I'll be even better off. And based on my popularity rise, I've got a fair shot at it down the line <AllFingersCrossed>.
So, overall, my methods are working, slowly but surely, and they're not over-taxing me, making me enemies, or breaking any laws. As it's based on a concept of honesty and good conscience, it suits me as a way to do business (I'm not a cutthroat kind of guy). I'm not saying here that anyone else's methods are bad or immoral... just that my methods are good, and they're getting the job done, so I'm comfortable with it. And as things progress, I can imagine me changing my business model to suit... or, if they begin to digress, change my model, or get out of the business. Either way, I will have learned something, made some money, and I feel good about the fact that I managed to entertain some people without ripping them off. So I sleep well at night.