1) Yes, there are idiots who do this stuff.
2) Most of these stories are from ten years ago based on the hardware described, but we can assume the same tactics are used today.
3) I service PCs for corporate and home customers - and I don't do any of that crap. I'm not the most hardware-oriented technical support person you'll ever see and I'm not the sort of techie who knows Windows internals forwards and backwards, but I usually fix the problem regardless and I do it in a way that doesn't cause problems down the road.
I also charge a reasonable rate - which means I'm barely paying my rent. So obviously I'm an idiot.
I charge 25 bucks per hour for home users with a maximum charge of $100 - and usually that means I work a couple hours for free on a spyware cleaning and repair - and 50 bucks per hour for business users. Obviously I could charge a lot more. But there's a lot of competition out there from out of work tech people who also charge low. And despite claims from some people that customers will pay tons of money for computer service, the reality is most people REALLY hate paying anything more than what they paid for the computer in the first place and only get support because they're desperate when the machine is unusable (which is why they can be suckered by the unscrupulous).
Another scam that is very common these days is the "remote maintenance" company, who charges you a tiny amount of money per month and who promises to fix your machine remotely from their systems if you have a problem. I've never figured out how they expect to do that when the machine won't even boot because the hard drive has died or the home router doesn't work or the customer doesn't even have Internet. Sure, this can work with a spyware cleaning - IF the spyware will allow you to remote in or the machine isn't running bone slow because of the spyware. And if you've ever done any remote support over the phone, you know what a painful process that is, especially with a naive user.
There's no substitute for a guy standing in front of the machine who can assess what the customer has done wrong and can help the customer do things right from now on, as well as actually physically seeing what is going on with the machine. I've had several clients call me after the "remote maintenance" company either couldn't fix their problem or screwed things up even worse.
It seems to me things would eventually get better if every grammar school and high school in the country had a basic computer course teaching everyone how to buy a machine, something about the innards, and how to use a machine, including proper computer security, and how to fix the most common problems. I don't know if school systems do that these days, but they should - computer savvy is a basic survival trait these days.