With that said, though, how can we be so sure that a 1% house edge is not a rip-off? We just feel that's kinda normal (read, small), but do we really know that for certain, as in justified
true belief (the classical definition of knowledge), with emphasis on true? Has it never occurred to you why exactly the house edge is so small? Would it really be enough to cover the costs if it were only for the house edge and nothing else? If most profits actually come from the casino's bankroll as discussed in
this thread (with which you must be familiar), then even a 1% house edge might be a rip-off, after all. And then things may start to look differently (to a cheater, at least)
In general I think a 1% house edge is fine, unless we know the turnover a certain casino has, because 1% can be huge or tiny profit. Since no casino will publish their turnover, I would then assume that it's not a rip-off, until I get those numbers. So to answer your question: Do we know for sure that it's not a rip-off ? No.
The house edge is so small, because casino will always win longterm - risk-free. Could it be even lower ? Probably, but without numbers hard to judge. I have no idea what it costs to run an online casino and what turnover you can generate. The sheer number of casinos popping up suggests they are making good money though; in a market that never seems to get saturated.
With this higher bankroll thing (link doesn't work btw), I already told you that it's too far from reality for me. Yes, you have your street games example, but everyone is free to have a higher bankroll than the house and you can't call people rip-off artists just for that.