People often think my faith in those at Linden Lab is a bit too much. Seeing the current state of the grid and all of the problems it has, I can understand why. I guess part of the reason I have faith is that I can see a direction that I would be taking Second Life in the long term, and I believe that the path I see is somewhat similar to the path Linden Lab is walking on. The way I see Linden Lab's business model heading long term is a cross between MySQL AB and InterNIC. I don't think their desire is to be an ISP, which is currently their role in many ways, and there are quite a few other ways them to make money, since they hold the keys to the domain, as it were.
For those who don't know, MySQL is the world's most popular free, open source database server. There are literally millions of installations of MySQL out there, and some of your favorite Internet services use it: Linden Lab/Second Life, Craig's List, ClassMates, Google, Hot or Not, Yahoo!, Tomb Raider, the City of New York, and of course, SLBoutique and SLTrivia! MySQL AB, the parent company, gives away this amazing product for free. Out of the millions of installations, key customers (some listed above) pay for service. They charge on a sliding scale, based on level of service; some have up to "X" incidents per year where they can call MySQL AB in, and others have "all you can drink" type service. I believe about 15,000 total companies pay MySQL AB, the company, for service. They make a pretty penny, but compare that 15,000 versus a total of 8 million installations. They also control the source code; anyone who modifies the source code has to submit their changes back to MySQL AB, who can then decide whether or not to incorporate the change. They also employ developers actively working on the project. They're a profitable company. I can see Linden Lab heading in this direction with the code for both the viewer and the sim server.
Some things on the Internet need to be centralized, but distributed. An example of the central and distributed model is InterNIC and DNS. InterNIC is the authority where you register domains, like SecondCitizen.com, LindenLab.com, or SLConvention.org. DNS is the system that allows browsers, email servers, email clients, and basically anything that uses the Internet for communication to point these names at the correct servers world-wide. I foresee Linden Lab doing the same with the grid; you pay them a small fee of $X per year to have the right to plug into this "square" of the map. They maintain what squares go where. If you're Anshe Chung, and you have an entire continent, you'll probably want to host them in the same data center, so border crossings are smooth (relatively), and pay Linden Lab for a full joined block of squares. The land store is the infant-stage of this registry.
The long and the short of it is, Linden Lab could eventually host only a few servers: their master user server cluster, the "grid map" server cluster, the money L$ server cluster, and probably a few beyond my foresight. You could either host a bunch of private sims, with your own core servers, or have your sims subscribe to Linden Lab's master servers. This would plug you into the "main grid" map, use the Linden Lab L$ economy, and allow anyone with an account access your sims. Think of this option as how the world works today, except that instead of sims all being centrally located, they're hosted at various data centers world wide.
There could also be subscription servers for asset storage. It isn't a big leap of faith to imagine that the ( SL viewer + Linden master organizational servers for one virtual world + simulators hosted world wide + Amazon's S3 acting as asset server = "The Metaverse" ).
I've talked to various Lindens over the years about the possibilities, and none of them have said this is the direction they're headed. This is just the way I see things starting to play out, and the direction I would be heading if I ran Linden Lab. They're very bright, dedicated, capable people, and I think of lot of the problems that are occurring now are because something like I've stated above is the long term vision, and they're focused on long term goals instead of short term band aids. At least, that's what I hope!