Re: ...but it STILL doesn't scale!
of course not. nobody would ever bother to do any sort of analysis on core internet infrastructure before making changes to it.
but don't take my word for it. read this: http://www.icann.org/en/committees/dns-root/root-scaling-study-report-31aug09-en.pdf
we will not have "millions of TLDs". the new tld craporama might add 500-1500. almost all of these will fail, some very shortly after they launch when they get no takers.
look at how few of the tlds icann created so far have actually been sucessful: 3 or 4 out of 14-15. that failure rate is bound to go up because world + dog will be fed up with umpteen .com wannabees that nobody can be bothered to buy. so once that new tld bubble bursts and the .whatevers go tits-up, common sense will eventually prevail and there will be no more talk of new tlds.
only those with more money than sense "invest" in a tld. what we're seeing at the moment is a small-scale version of the internet/.com silliness from around 2000 or theresabouts. lots of mugs are going to lose a fortune. a lucky few will make millions selling their tld to a vc firm or private equity house hoping to jump aboard the next big thing bandwagon.