good post; I think you defined the issue well. On the issue of localism ....
It is difficult to measure but neighborhood blogs are growing readers.
In regard to this point: "Increased Competition and Choice are the Real Localism Killers"
There isn't that much competition. The number of neighborhood blogs is small, but growing rapidly.
Much of the dicussion is about saving newspapers and connecting newspapers with readers. Newspapers are irrelevant. The expertise, news gathering and editing that newspapers have developed is all open source and easily transferable, and that's what is going on. That knowledge is moving out of newsrooms and into the communities.