You make some quite valid points. As you noted, the "below 400 agl and within a mile" has been around a long time, for RC aircraft. That said, people with R/C aircraft generally aren't operating them over a city, for example.
Secondly, that is just the camel's nose under the tent flap, a decision made by the FAA to get the Congressional members and the UAS lobby off their (the FAA's) back for a little breathing room.
You are right on regarding the cost of large UAVs--they're cost prohibitive for most missions, and most entities simply can't lay out that much cash. That said, much smaller UAVs are VERY attractive right now to a LOT of people with stars in their eyes, thinking these things will be really cool to play with, and who are moving full speed ahead, and damn the torpedos. Don't let logic get in the way.
One accident shutting down UAV's???? I think not. Once the FAA develops a version of sense and avoid that they accept will provide a reasonable level of safety, they aren't going to readily admit that they screwed up, and of course, the Congressional types who pushed this will blame the FAA for establishing flawed regulations. The FAA will argue that the regs are sound, but the operators and pilots were to blame, etc, etc.....
At that point, the industry (UAV) and the FAA will have too much invested in the whole program to tube it......and so something is going to have to give.
My guess is that which has to give will be the weakest lobby....general aviation. ADS-B MIGHT have the capability of deconflicting drones from airliners most of the time, but requiring ADS-B in ALL aircraft will be the end of much of general aviation. If anything kills the drone programs, it'll be a Global Hawk size UAV dropping through the roof of a congressman's summer home......while he's home.