I hope that you're wrong. Given that there is money to be made from fiction, I think that a model will emerge to tap that market in a way that is widely viewed as fair. The problem with the ebook market at the moment is that the major publishers are not supporting a model that provides convenience, quality and a fair price.
The smashwords approach looks like a good one. I've downloaded your free book, and if I like it, I'll buy more. Like a lot of people, I tend to buy books from authors that I've read before, or who I have a trusted recommendation for - or that are free. In a world with so much on offer, much of low quality, I think a free taster is a good idea.
It seems to me that it's too early to say how all this will pan out. I don't think that your original "honesty box" approach will make many authors a living, but I'm hopeful that the smashwords model (free tasters, low price but direct from the author) can work.
There's an
interesting blog from JA Konrath on this.