As a member of the Steem Coop and Project Smackdown, I agree with a lot of what you're saying here. Us members have slightly different perspectives and ways of expressing our concerns.
I often disagree with the exact terms elfspice uses, but we usually end up agreeing in the end. The problem as I see it is mostly psychological and secondly economical.
1 The user upvoting himself a lot, will often for good reasons make himself look like a douche taking large sums in reward without considering differing opinions. If he gets away with it, that makes the entire system look weak/deceptive.
2 A large stake holder voting for himself is spending a large amount of his votes on himself rather than curating more broadly. This means that he is propelling himself higher in the ecosystem. When this is done in mass, the same starts to apply to the whole system.
I don't see any and all selfvoting as bad either. But it depends on the reasons behind it, which we will have a hard time knowing unless we ourselves are the person upvoting.
You say
Voting is not about peer review. It is about using your stake as you please.
and I agree that it's about using your stake as you please, which is what we're currently doing with the bot. However creating a social media platform that will reach wide acceptance is about creating a system that will promote community, which is in fact a matter of reviewing peers.
I don't for one second think that removing the selfvote will bring neither Steem the social network to a halt, nor Steem the 'organically' growing and selfadjusting blockchain which could be used for a number of other things. However the selfvotes themselves work against decentralization and gives bad publicity, especially because of the psychological incentive difference between giving yourself 1 cent versus giving yourself 50 dollars.
As Dan has said, voting both directions and for whoever you want is allowed by the system and expected to be. In this project we're working with the same constraints. We're using our stake and voting the way we want to vote.
In the future, what I personally want to do is get away from bots as much as possible. The bot is merely a way to influence the general outlook of Steem users and to make selfvoting less popular. Ideal would be to make a carefully thought through hardfork change down the road.
The really weird thing is, this person isn't going to ever realize that they could make more by voting for other people's good content. You know what? I'm fine with that. Their loss.
The problem with the above argument is that we all know not all good posts ever make neither the user posting nor the user curating that much money. And even if they did, the average social media users would get left way behind the selfupvoting larger stakeholder. The system doesn't selfcorrect quite as well in this sense as many users would like to believe, even if it also isn't as bad as others think.
I just want to add one thing, that is also relevant as you mentioned @dantheman's posts about the use of downvotes. The downvote, and the flag need to be separable. It should be possible to disagree on post rewards, but not on the overall reputation of the egregious self-assignment of rewards. It should be possible to flag, and not affect rewards, if your primary goal is to send the message that the content is not just bad, but invective, inflammatory.
I believe that having a high reputation, but low SP, diminishes the effect of a downvote or upvote on the reputation of the target account. I don't know the full details of the mechanism, but I am pretty sure there needs to be an option to balance rep effect and reward diminish effect. Oh yes, for one very simple and obvious reason:
Let's say you have some spammy post that you want to flag, and you have enough rep and SP to push their whole account under zero. But they only have SP of, say, 2500, you will thereby consume all of the vote power required for this smackdown to give the reputation effect, but it only needed 2500SP of 100% voting power to erase the reward.
Or in other words, if you can alter the two parameters, two sliders, you can conserve your vote power, while inflicting a full reputation hit.
Or vice versa, to upvote with only a small reward, but a big boost in rep.
Note that 'disagreeing on post rewards' was not always listed in the flag interface, yet you cannot avoid affecting them when you use it.