You're of course correct in that there is no inherent right in getting paid for copies. But this arrangement was put in place to make more people able to make a living by creating music (and other works of art). The rest of your arguments are plain wrong.
First of all, most musicians are not signed on big labels. As a member of a struggling band I don't make any money, I'm actually losing lots. Small bands don't get paid for playing, and almost never get traveling expenses covered. For playing our own songs live we get a small fee from TONO (Norway's Performing Rights Society). About $20 which is split 4 ways. Whoopie.
Although I believe non-commercial distribution shouldn't be criminal, your solution will make musicians even poorer (remember, most musicians are not signed on big labels, probably not on any label at all). If you still want a varied culture (not just big label crap) you'll have to put another financial compensation plan in place. And then you're back to square 1. You're still paying, but in a different way.
If you think smaller venues can afford to pay musicians decently, you're wrong. I'd be a happy man if you put together a good plan for compensation for live performances, but I have yet to see anything like this from a self-proclaimed Pirate.
And just for the record: I'm not out to make money on this at all. I'd just like to be able to cover my own traveling expenses.
