What you have just described gives an artificial advantage (or disadvantage in the case of bittorrent) to managed protocols, discouraging innovation.
You have it backwards, if anything.
A neutral network should not discriminate based on packet contents whatsoever.
That's the issue being debated, not just a conclusion to be stated as final. The Internet was designed with such "discrimination" because the people who designed it understood that it is a useful function.
If you return to the reason for net neutrality in the first place, it is based on the desire to prevent ISPs from gaining an advantage as both the service and content provider by artificially slowing competitor's content. That doesn't argue for "no discrimination whatsoever", it argues for "no discrimination for the same kinds of content".
There are very good reasons to prioritize content that needs low latency and guaranteed delivery, like VoIP or streaming video. VoIP starts to fail if the packets show up late or out of order. Your bittorrent of an ISO or video file does not.
Beyond that, an ISP has no business discriminating based on address or packet contents.
Address I agree. Completely. That's net neutrality. But contents? Of course they do, and your proof by repeated assertion is still proof by assertion.
The moment that is allowed, ISPs game the system.
As seen, they invest in smart hardware capable of culling unwanted traffic rather than adding capacity,
Where have I said anything about culling traffic? Nowhere. That's hyperbole on your part. Prioritizing time sensitive content is not the same as culling everything or anything else. Culling traffic is wrong not because it fails net neutrality tests, it is wrong because it fails to fulfill contractual service provision agreements.
There is exactly one good solution: add more capacity when necessary.
Yes, in a perfect world with unlimited money and resources, that is the "exactly one good solution". When you find such a planet where this exists, please let us know.
This is the simplest, least expensive
That is not necessarily true. It may be simpler but will hardly be less expensive. If my ISP has to come to my house to install hardware with higher capacity then it will cost someone -- most likely me. If they have to install that hardware for the entire block because one person thinks his ISO download should never every be slowed by even a fraction of a second (not that he's even likely to notice) for any reason at all, then I'm getting charged for his wants and get nothing out of it. That's fair?
and perfectly fair.
No. Everyone who has to pay higher rates because some people think it is unfair that their file downloads or email traffic may be slowed temporarily while someone else's VoIP call gets priority is not being treated fairly.
While it would be the "exactly good solution" for everyone to get infinite bandwidth and never have to share anything with anyone else, that's much more expensive that the current system, and does not exist.
It also ensures that there will be an excess of capacity available for innovative new protocols and uses.
So you want not only enough to cover the current need, you want an excess so that someone might be able to invent something new sometime in the future. That's not an argument based on net neutrality, that a blue-sky wonderful utopian view.