Also, since the entire block chain must be downloaded to a local machine before that machine can acquire a bitcoin address and utilize a wallet, it seems that some sort of "practical maximum" of the block chain should be defined, or at least thought about.
What am I missing here?
Lightweight clients can utilize a wallet without having the block chain.
If it's the miner, could an entity set up a massive supercomputer, mine most blocks and then set the transaction fees to 99%?
Yes. Note that they won't make it 99% because then people will stop using Bitcoin, their price will collapse and the miner will not have any revenues.
This has been discussed before, and IMO it is a vulnerability that will need to be patched.
(But as others said the miner doesn't "set" the fee, they just exclude all transaction that don't give the fee they want.)