Seems like we substantially agree; just a few minor points.

Isn't the House of Lords still based on hereditary (and newly-bestowed) titles of nobility? If so, it would tend to represent Britain's wealthy class and obviate the need for explicit representation for business. But the US Senate is different. Originally Senators were elected by state legislatures, making the Senate a body that represented government (and business to the extent that business influenced state legislatures, not inconsiderably in the 19th century). In 1912 the Constitution was amended to switch to direct election of Senators, shifting the concept to one of regional representation. At no time has it been explicitly a body that represented business, though of course on a practical level it often seems that way. When big business needs something they tend to buy a Senator rather than a Rep. When Utah's Novell was fighting with Microsoft, they turned to Senator Orrin Hatch, who became known as "the Senator from Novell" for his tireless efforts to protect their bottom line using the power of the government.

Your characterization of the purpose of the electoral college strikes me as needlessly paranoid. On the surface it seems like a straightforward way of delivering the vote counts from the hinterlands to the capital in an era of pitiful communication and transportation. The really puzzling question is why the electors aren't bound to honor the votes from their districts.

Alexander Hamilton defened the electoral college in the Federalist Papers. His thinking (laid out in a letter too verbose to easily excerpt) seems to have been that the electoral college would be like a temporary legislature whose sole duty is to elect a President. He was concerned a lot with insulating the process from the temporary swings of public mood as well as pernicious influences, consistent with the overall philosophy of checks and balances.

With two centuries of hindsight I question that logic. There have been vanishingly few instances in which electors deviated from the popular vote, and those instances caused a scandal. The people, for better or worse, consider the issue closed on election day and don't take kindly to some elector overruling their judgment (as we were reminded only three years ago; not an exact analogy, but in effect the electoral college was the instrument through which the Supreme Court overruled the people). I'd say that the electoral college was an idea that sounded good in theory but turned out bad in practice. I'd be happy to see it go.

I hadn't thought of expressing the quality of democracy in terms of the extent of competition, but you're exactly right. The two parties have established a cartel with a stranglehold on political power, shutting out smaller and probably more innovative competitors. How utterly un-American! Politics would be so much more engaging if we could see a debate between, say, Greens and Libertarians, than the tired old formulaic rituals engaged in each election by the institutional parties. I can think of nothing that would be more likely to resuscitate American politics and re-engage a cynical and alienated electorate.