You made some really important points here.
I would just like to add that IMHO, in an ideal world where music is all creative commons to some degree or another, the likelihood is that there would be an increase in attendance at live gigs because there you could see an artist give a unique performance of their work. More importantly it would mean that in order to obtain popularity and artist would actually need to be good at what they do, so the quality of popular music in general would go up, maybe at the cost of the typical manufactured group that are marketed for their looks rather than their talent as musicians.

On a side note, if there was greater demand for live musicians with high quality backing bands then I'd be making a mint!! :)