I agree with everything you said except this. Have you ever done tech support? The average computer user is still VERY incompetent. Don't think in terms of yourself, think in terms of your grandmother, or your uncle who actually double-clicks "Free Porn.exe". Those are the people that DRM is primarily targetting and it is still very effective at encouraging them to buy. Even competent users are still wary of potentials for viruses in the cracks, so imagine the people who aren't even going to the "reputable" sites.
I haven't done tech support beyond fixing up the family PC and helping some friends back in college, but if you are basing your perception of most computer users on what you see in people calling up tech support then I'd call that the mother of all sample biases. But beyond that, how much complexity do you think is actually being added for pirates when using DRM beyond a simple disc check? If you can't pop the disc into the drive, fire up Nero, and just hit "Copy", then that stops everyone who isn't willing or able to go beyond that. But for everyone who is, simply heading over to a torrent tracker is pretty much the next easiest thing to do. So again, how is all the extra complexity and hassle deterring pirates when both the simple disc check and activation model protected games both end up on torrent sites in about the same amount of time?
As for your claim that DRM encourages people to buy, you're making the same mistake as the folks in the gaming industry who failed Econ 101 in assuming that the demand for a game at $50 is the same as the demand for a game at $0. Regardless of whether DRM can deter some amount of piracy, it says nothing of whether people will be willing to buy the game, and generally I'd contend that the overlap between people looking to pirate the game and people willing to buy the game at $50 is pretty damn small.
But take a look at Mass Effect PC (one of the first two games to use activation model Securom). All the Release Groups tried to crack that, got rid of the basic DRM check, then left. (Un)fortunately, people still couldn't play the game due to a bug that cropped up in the hack-job. A LOT of people bought that game because they really wanted to play and thought it would never be fixed (hell, I think the cracks for that game STILL have issues with regard to the DLCs).
So basically the gaming industry got lucky on one game. Out of hundreds. I must say I'm quite unimpressed. Also, do you have any data to back up the claim that some meaningful number of people who would have otherwise pirated the game bought it as a result (keeping in mind that "data" is not the plural of "anecdote")?
And honestly, that is why developers no longer care about SP anywhere near as much as MP. People are going to crack SP. But if they want to use ranked servers, they need a legit copy for MP. So win-win.
I'll say the same thing to this that I ultimately say to everyone who focuses on the piracy-prevention aspect of DRM: you're doing it wrong. It's not about what people will or won't be able to crack, it's about what people will or won't be willing to buy. You could make a multiplayer game that people can't crack, but that doesn't mean much if only half the number of people are willing to buy it than would have if there was a large single-player component to it. No matter how many obstacles you provide to prevent people from pirating games it's all meaningless if you don't provide what's actually import: reasons for people to buy games, and over-aggressive DRM actually works against this.
Like I said, gun control or anti-drug laws. People are still going to shoot people and/or get high (hopefully not at the same time :p). But for the everyman, they work. Do those laws inconvenience people? Gun enthusiasts and people who ACTUALLY need medical marijuana for their glaucoma would say yes (just like we say yes when we scream about limited activation models). But, at the same time, a lot of people are discouraged. And that is all you can really hope for.
The whole war on drugs has been one of the biggest clusterfucks the US has ever engaged in. So maybe it will be a rather apt analogy for the DRM situation. Let me just say for the record that I think quite a few drugs should be legalized (and also for the record I don't use any drugs), and I am also a strong supporter of the right of the people to keep and bear arms. But in the interests of not derailing this thread I won't say anything more about either of these matters.