Working at the abstraction layer of disks is misleading because there are so many other pieces that go into making a service like S3.
Instead I'm proposing an arbitrage that works one layer up -- on top of S3.
> Also, how much would de-duplication help? I mean, how much stuff is stored on s3 that is uncompressed? (or the same compressed file?)
It's a good question. The answer is unclear. Certainly if you're willing to get exotic with redundancy elimination (as opposed to dedup, which is a subset) and large-data-set compression algorithms there just are going to be economies of scale. What's not clear is (a) how large those economies become, or (b) how exotic your algorithms have to be to capture those economies.
> ..I could turn a profit renting uncompressed drive space at $0.05/gigabyte/month..
I wouldn't want to compete with Amazon S3. Data safety and uptime would keep me up at night like a mofo. I just wouldn't want to run that company, though I can imagine folks like MS doing it.
> Costs in the outsourced infrastructure market, as far as I can tell, have always been dominated by marketing.
This is a really interesting question. The landscape is obviously changing with the current batch of cloud infrastructure services.
I do think there are pieces of cloud storage that will not be commoditized, most notably the peace of mind around data safety and uptime. I wouldn't want to use a small cloud storage provider. Thus: (a) they will be able to charge a premium for a long time, and (b) there will be a smallish number of providers, meaning marketing will be less important in the future than having a good product.
(I'm not sure how much the API's and other development tools will be commoditizable. MSFT historically does a great job of embrace & extend when it comes to those parts, though their recent cloud services are too wedded to Windows and .NET.)
(EDIT: added responses to more of your original post.)