Travis:
You make some good points, but part of the logic is flawed in my view.
In essence, your point is that these companies "legitimize" some fakes and create a false sense of security, the collectors don't do their homework, etc. In effect, it is the fault of these companies that these fakes are allowed to flourish.
Following your logic, if these companies didn't exist approving questionable items, collectors would be more educated, they'd all do their homework, go to the proper dealer/experts, have everything reviewed my muliple trusted sources, etc., etc.
Sorry, I just don't buy it.
Big money will attract fraud. Ruth balls would be selling for big bucks whether PSA existed or not. And collectors would be just as lazy and look to some source of expertise whether PSA existed or not. Instead of trusting the opinion of PSA, they'd be trusting the opinion of some dealer or auction house, who is no less prone to the same shortcomings of a TPA.
I think your view of the hobby sans "alphabet soup" is not realistic.