Thanks for this. It is really fascinating to see the Internet starting to play a key role in democracy and government affairs.

as far as the rest of your points are concerned, there are three answers. education education education

The real issue in my view is not the medium, it is education in order to:
1- get people to write well (essential to their participation in the global democracy)
2- get people to be interested in the life of the city

I found Willem Buiter’s recent blog interesting. Essentially his thesis is that you either get efficient or over-controlling government and therefore expensive government is a cost of liberalism.

http://blogs.ft.com/maverecon/2008/12/in-praise-of-government-incompetence/

I think the democratisation of funding, the potential breakdown of party-organised politics (as opposed to values-driven) and the subsequent weakening of lobbying systems with their inherent corruption, all of this will yield a better political landscape, better government. For one thing the cost of public administration will drop, an appalling level in most countries today.

You should probably take a look at the work by the Oxford Internet Institute (http://www.oii.ox.ac.uk/) in this area. Dr Victoria Nash gave a very interesting presentation at the recent Silicon Valley Comes to Oxford Networking Masterclass. She covered a number of internet facilitated citizen engagement models. If I recall correctly (and here’s where I wish I had a copy of the presentation, or took better notes) her position was that the present evidence gave little support for levelling of traditional influence structures, or greater citizen participation in policy formulation, but that the internet was proving to be a significant tool in the use of democracy as a means of removing bad government.