Steve,
I can't give any example of an author made popular by piracy. But I can give you an I.P. industry that was. (And the answer is...) home video! Home video started with porn and piracy. People recorded off-the-air TV shows and movies uncut movies from HBO et.al. Hollywood was so anti video that they took Sony all the way to the Supreme Court to try to kill the sale of video recorders. (1979-1984) To quote MPAA head Jack Valenti in 1982 testimony to Congress - "I say to you that the VCR is to the American film producers and American public as the Boston Strangler is the woman home alone." The Supreme Court rules 5-4 in favor of Sony. A near thing.
So? Did Hollywood go broke? As of the last agregate numbers I have heard of (for 2006) video revenue was nearly <twice> the theatrical revenue. And that's despite DVD crackers, Dixv, Organized third-world piracy, decades of analog piracy, and cheap, for-pay lending libraries of movies (i.e. Netflix). Look how much money Hollywood would have lost if they had <won> their anti-piracy suit....
Once they lost their suit, Hollywood was forced to start providing movies at prices that encouraged buying rather than copying. (Why waste you time making a copy when the commercial video was cheap?) And as long as prices are cheap, they'll make lots of money. If they raise them, (and several times they've tried) the cash flow will drop because people will decide it's worthwhile to pirate again.
Baen Books understands this. So does Apple (although I loathe them). Amazon has grasped the idea, but still hasn't fully implemented it yet. I don't see why (as a businessman) you don't intensely study the biggest success story in the e-book market. (We'll see soon if TOR has gotten the idea....) Most (but not <all> people) will pay for convienence if it <is> convienence and <is> cheap. (And remember - E.E. Smith never made a living off of his writing, either.)