To you and many of us certainly, but do you really think that's true of the average user? Especially given the tradeoffs (most residential internet connections would be terribly slow and unreliable for such a purpose) it seems very unlikely that the average person, who has only the vaguest understanding of technology and probably hasn't given much thought to their privacy, would be enthusiastic enough about this idea for it to take off.
"Average user" mostly means "clueless user". This is unacceptable. Everyone should know a minimum, like the difference between a web browser and a search engine. When they do, they will easily see the privacy problems.
I agree $99 is too much for most people. But this is only the current price of a Sheeva plug. I think we can eventually lower it down to $30, which would be more like it.
We have both the hardware and the software. Packaging the whole only takes a dedicated GNU/Linux distribution (or even just a meta-package). So, without the political and teaching issues, Facebook and Gmail could be made obsolete within the year. With them, we'll need a decade. But, to quote Eben Moglen: "It's not that it can't be done".
So I don't think we need a totalitarian regime for people to realize they might want a personal server. It just takes a little teaching. Personally, as soon as I have a provider which let me send mail on my own, I will buy one.
Yes.
It just takes a little teaching
Sadly, no.
So: am I asking too much? Do we need even more than that (except a 30 buck, very easy to use, low power server)?
People will eventually realize what a dystopia this is. So my guess is that Facebook (and similar services) will become obsolete soon (within a decade or two). Just sell easy to use personal web servers[1] that you just plug into the wall, and they are toast ($99 is much cheaper than my privacy).
[1] By "easy", I mean esier than Facebook itself. By "personal", I mean at home (virtual private hosting is not personal).