Great, thought-provoking piece. Two and half questions.
First, under your second "impolite" option, would the poor be stuck with lower quality schools that they could afford? First and a half, what are the implications for transmission of poverty and for inequality?
Second, what is the rationale for why governments should subsidize education under this regulated education market?
And a final comment, realizing that this is a think piece rather than a policy recommendation. The politics of education reform are such that, as you've pointed out in previous blogs, the poor are stuck in a low-level equilibrium of dire service delivery- so how do you shift it from one state to another? Too many folk benefit from the status quo.