Wow, I actually feel slightly worn out after reading all that, a fine (if maybe long) piece indeed. The problem of money supply is one which is of the upmost importance, and yet due to its dry nature arouses little passion until of course things start to collapse as they have recently. The old economic way of supply, demand and philip's curves are gone, we now have what I could best describe as a confidence economy, one based mainly on services which require consumer confidence. Bubbles in areas like housing are pretty much inevitable if we allow the house market to function in such a situation where prices are dictated by confidence rather than value; where the winner's curse triumphs (where the value of goods is dictated by the over confident and optimistic and are hence over valued) and reality can be easily left behind in the pursuit of profits.
I would not argue for monetary changes (although that is more due to my ignorance than any opinion) but I would argue that the housing market needs far stricter regulation in terms of what people can borrow, a situation where banks are knowingly lending people more than they can pay back is unnacceptable and has led to the situation we have today. If you want to see more on the subject, Jim Cramer has recently done an interview on the colbert report (you can find the video on the colbert report website at comedy central).