I have studied physics. Having lived in several countries, I have a reasonable appreciation for international law. Sure, my economic theory is a bit shaky, having only really studied Adam Smith. Yes, I am a hardcore libertarian and I make no bones about it. I have read up on the "well documented limitations of the markets" and, frankly, I am not convinced (more later). I have come to a grudging respect for the role of a strong court with the ability to enforce its decisions. I have also come to an appreciation for the economic creative power of a peaceful region that can predict conditions in the near- and medium-term futures.
As for limitations of the market, please read http://users.tpg.com.au/users/jes999/16.htm and let me know if I'm missing any limitations. In lieu of that, I will assume that this is a reasonably complete list and move forward.
The first skew in assumptions between your POV and mine is that you are discussing countries and I am discussing companies. They're not going to behave the same, so to extrapolate the behavior of corporations based on the existing behavior of countries is, imho, an exercise doomed to failure. Additionally, I am assuming that the majority of orbital things are going to be corporate-owned rather than nationally-owned. This is the underlying assumption to my entire chain of reasoning. Additionally, whenever I propose a set of numbers, please take that to be indicative of a concept, not as an actual hard proposal.
Instead, I would argue that the behavior of corporations in existing similar markets should be examined. Such as, for instance, the ocean. There are thousands of ships, large and small, moving through the oceans on any given day. There are well-defined shipping lanes that didn't arise as a result of international law. They arose through the natural flow of the markets. (Yes, I did some research on this.) Mimicking that would be a good start (and, I suspect, is what has happened).
The point behind the registry is that it's a claimstake. This idea arises out of the early settler days. If there was a problem between two people, the local circuit judge would come through and see who had the best claim (based on various criteria). His ruling would give the winner the right to shoot the loser for trespassing. Seems like a good plan to me. At worst, you get into a corporate war which the shareholders quickly shutdown as being bad for profits. (When was the last time a country stopped shooting at someone because it was bad for profits?)
As for assuming space-stuff wants to stay in an orbit ... I don't mean to give the impression that I'm assuming that. Maybe it's better to talk about registering "flight plans" or somesuch. You go ahead and declare "My thing is going to describe this motion over the next 5/10/20 years." That can be an orbit, a Moonshot, a lunar orbit, or even "I'm going to trail the Earth by 1M miles." If you require an accuracy of 10km in these plans and give everyone a 5kmx5km box to live in, that should work pretty well. Doesn't give much response time for humans, but computers would be ok.
It is difficult right now to remove junk. It was also really really difficult to store data on a disk in such a way as to retrieve it very quickly. The markets solved the latter problem and I am almost positive that, given sufficient pain, they will solve the former, too.
Pain, as I see it, is the pain of people who have the purchasing power to get someone else to fix it. Yes, it sucks that minefields are in places where the residents cannot pay to fix it. When I have a billion dollars, I'll gladly help out. But, you'll notice that most of the people with the funds don't consider it to be a big problem. Very few companies consider it a problem worth attempting to solve. If that land was worth something, then it would be solved right quick. In other words, if the residents on that land found a way to make it worthwhile to clear, the mines would be cleared. Yes, it's a horrible thing to say, but it's the truth.
I hope that I have demonstrated that I can continue to carry my side of this extremely fascinating conversation. I am more than willing to read any link you give me and continue researching on my own. But, as of yet, I have not seen any specific deficiencies in my arguments. You have said "DC doesn't understand the fundamentals." and left it at that. I'll gladly learn these fundamentals.
My criteria for good software: