When did I say DoS was unimportant? I just wrote a giant email explaining how it can be resolved.

I think it's worth pointing out that Bitcoin was launched with no DoS protection at all, and it's still here. There are still obvious DoS bugs being fixed with every release. So yes, it's important to robustify the code, but not to the extent of not having any features. If Satoshi had taken that perspective Bitcoin might not exist at all. We can have our cake and eat it.

RE: shutting down services dependent on replacement. No, good users of replacement would still end up taking priority over the constantly churning DoS replacements. The most you can shut down is one contract. Obviously, if there's no form of tx replacement at all then the "tried and doesn't work" state is the same as "never tried", which doesn't seem like a win.

The testnet is trivially DoSable today by anyone who cares to do so, there are hardly any nodes and most people get coins from the faucet. Look at how quickly people got upset when somebody drained it. As Jeff has pointed out, there could theoretically be a "nextnet" but the overhead of setting one up doesn't seem worth it. If somebody wanted to troll developers they could easily DoS testnet and nextnet simultaneously with bandwidth to spare.

 

Yes, I noticed it a few days ago when making some notes, but figured I would indeed make an prototype implementation and then just put all the details and latest protocols on the wiki at once. As nobody indeed noticed the bug for years apparently nobody else is working on this so it didn't seem urgent to update.

Your proposed alternative doesn't seem any different DoS wise. Someone can still broadcast a long series of incrementally different transactions and have miners replace them. So you still need prioritisation of work. It's useful anyway for other reasons. And as you point out yourself, it's still susceptible to the problem that you end up running out of money because it's all been spent on fees. 

BTW $500 is rather low for the amount of work required. If you added a zero onto that there might be more takers.