Simons,
I just have to say that you have some valid points.
Though I would disagree with you on the point of readers who will disregard bad literature if its free and not say a word.
Some may know me has doing some cutting reviews of their stories. I would "pay through the nose," as I put it for good stories, and I'm not just talking about the well established websites selling ebooks and print. I may have given the impression that I dislike well established book selling websites, through any format, but this was wrong. I have been a reader for years, and it was encouraged by the early days of Silvermoon on the topshelf, to its introduction on the web.
Though I would wholeheartedly encourage good writers wherever they are, or for whoever they write for and will buy from any site. I do feel that we need to encourage those that write for BDSM library, though that will not deter me from telling some one they are rubbish as I get a free story.
One problem with these stories is that we do not answer the question, would this or could this be published. Though the first question should be, don't you think, does any one like my work? It sems that by writing in a safe environment then budding authors may get advice, reviews and knock backs.