Good points, Steve, and mostly on the ball; though not all smaller houses offer only 'basic' editing. Having edited for the main players, I would back the quality of my own editorial team against anyone's ... on all levels.
You might be interested in popping into the *For Authors* section of our own website at
http://www.bewrite.net. It's a warts-n-all piece that honestly covers pretty well all your points and one or two others and was drawn up with personal advice from other industry pros in houses big and small (and even personally cleared, pre-posting, by the highly-sensitive and astute 'Writer BeWare').
Where I strongly agree with you is that an author MUST do his/her homework and realise that there are many levels of publishing from the mighty Big Six down to the deplorable author mills and vanity-presses-in-disguise. After the work that goes into actually producing a manuscript, it's a sin not to put in the research necessary to be sure it will not have been effort, time and tears wasted.
Best wishes. Neil (and here's karma to ya for raising such an important point)