Really, the fee varied from 4%-7%+, it went from lowest buy to highest ask, on average no way to lose money long term.
This is even MORE evidence that it would be feasible. I'll admit I don't know that much about Silk Road, but from some of these descriptions it sounding more and more like this could totally cover Pirate's obligations if it's really doing the kind of business independent sources are estimating it is. It's raking in fees on risk arbitrage by moving the price accordingly, if it is based on lowest buys and highest ask and cannot be losing money, and it's making from 4-7%, that could easily cover the weekly costs in coin. A side effect of this, however, would be that the price would likely keep increasing the more it was used, as that coin wouldn't be sold, and new buyers would still buy coin to buy more SR goods.
I'm not sure how we're supposed to construe your comment as anything else but more proof of this. The safer the gamble is for Silk Road, the easier it would be for Pirate to cover his obligations. Your argument basically comes down to "it's too safe for Silk Road, so they can't possibly cover pirate's operating costs for this service."
Except for this part:
BTW barely any vendor uses hedging.
Do they publish public statistics on this or is this just a shot in the dark guess on your behalf?