I try to stay away from DRM protected work whenever possible. The argument that each copy should be purchased doesn't take into account the cost (actually lack thereof) of copying a digital work versus paper work. So I really see it as a cash grab as opposed to a legitimate cost. I realize one less purchase is not much, but it does make me feel better to not contribute to an infrastructure I do not support.

It seems to me, that if the issue was really piracy, would it not be sufficient to use digitally key the file when a work is purchased? Then if the work is re-distributed for profit a normal copyright investigation (physical or digital) would find it and the current fines would be levied. Otherwise, the purchaser can copy to other media as desired. It would all be traceable under an normal investigation. This of course assumes the current copyright laws work for protecting non-digital works. @Mark can you (or have you) given an opinion on the effectiveness of current copyright law for books?

Your idea sounds interesting but I'm not technically savvy enough actually to reall grok its feasibility. But your question poses a big "if" -- "if the issue was really piracy." Amidst the first industry reactions to Napster, there may have been a real fear of a more traditional form of media piracy, but if so it was misguided (simply because crappy-sounding MP3s just aren't made to compete with professionally mastered CDs), and in any case it was quickly seized on as an effective rhetorical weapon not to combat piracy as such, but to mystify as piracy other copying and reproducing practices that -- if materially suppressed and symbolically demonized -- could spell bigger profits for big media companies.

Disturbingly, the rhetoric of "piracy" to construct moral panics that are favourable to stricter copyright legislation has given way to much stronger rhetoric of combatting child pornography and terrorism:

A music-industry speaker at an American Chamber of Commerce event in Stockholm waxed enthusiastic about child porn, because it serves as the perfect excuse for network censorship, and once you've got a child-porn filter, you can censor anything. (See Doctorow's full article, "Music industry spokesman loves child porn")

As for your last question, it's well worth a more extensive treatment than I can give it here (maybe something for a blog post). The short version is that the ubiquity and versatility of digital media mean traditional copyright can't work for traditional print, anymore. Whole books, libraries are available online, legitimately and illegitimately. It may not be "piracy," but you're really not observing copyright law if you scan and upload a whole book that  isn't yours on Scribd.

In closing I'll mention that whether I think print works should be copyrighted is a different question than whether I think copyright works for print. Lessig's aforementioned book offers, in its last chapters, some sensible and practical alternative licensing arrangements and public-domain protections (not only Creative Commons) that would drastically transform copyright as it stands but could really reduce a lot of unnecessary barriers to a cultural commons locked up largely by the contingencies of an absurd history.

I would see that as a copyright violation and it would have to be taken down if the rights holder so desired. Perhaps I will try and describe what I am thinking on the digital side in a blog after I have had a chance to explore Lessig's book. It seems to me whole legitimate libraries online is a positive, the problem is the illegitmate activity.

Donation button great idea.