There should be a number of technology/infrastructure opportunities to enable economically efficient long tail markets - JIT infrastructure for real goods (and no, I'm not going all "Diamond Age" on you).
You pointed out Richard Nash's mention of short-run digital printing - sourced through Kinko's as a local distribution network, what are the opportunities if a full-sized book could be printed for $3? What technology would have to be invented to make that happen?
Many of these POD publishers apparently already sell via Amazon and so keep margins (expecially warehousing) to a minimum. If they start getting more than 5 orders in a week (or consistently start running out), they can run off more. Their warehousing is in terms of keeping a few copies on the shelf and having a really rapid restocking - which is pretty much controlled through a bar-code system, which autiomatically tells their printer to cough out a few more of this or that. (Which have to unfortunately be human-handled back to the shelf, etc.)
We are then looking at perhaps a statistically mis-figured scene with the Long Tail, but nevertheless a very potent and inexexpensive manner of making "below the radar" best sellers profitable.