I personally don't think you have gone bonkers, and you raise questions Ive asked myself a few times. While I don't provide direct answers to your questions, I do have tidbits which have helped friends land jobs, and thoretically could help you as well.

The first thing is getting known. Generally people I know have managed to edge out others because they were documented as being part of a team which produced some piece of sofware. They have also maintained a site(s), on which projects they have participated in were documented. One guy managed to score a job for having rewritten major pieces of a MUD. Had absolutely nothing to do with the job at hand, aside from being a programming experience. But there were measurable results (I.e the original buggy MUD, and the new lean mean extended stable MUD with an average of about 60 players on constantly).

What is your target market? There is a big difference between writing code for ma and pa, vs a small/startup biz, vs mid-size biz, etc.. Ma and Pa want it straight, fast, easy, and cheap. Small/startup are willing to wait for functionality if they can't do it themselves, and sometimes will avoid spending money if they can work around an issue. Mid-size and larger generally want shrink wrapped from what I have seen.
I work at a fairly large cable provider, and 9 times out of 10 they spend money they dont have because they have a contract that says its the other companies fault if it breaks. So can you handle the extra baggage of insurance, if the site/program is used in illicit ways, or is possibly used to gain access to the company's assets? Again friends have managed to edge out others due to the fact they had worked with certain other types of businesses or even not worked. One case in point is a web developer, who only did sites for smaller businesses. Some people wanted to hire him, and made sure he didn't work for any big, nasty, corporation I think the term was. (They were worried about who would own the site and domain and such, after hearing some bad stuff about other peoples plights)

I've seriously considered attempting to do contracts for "glue coding" as I like to call it. Using perl to link together all manner of system info and functionality. But right now it isn't right for me. I have a decent network of people who could probably find me the work, but I just can't deal with all the possible ramifications. To incorporate or not, if so what type of corporation to become, etc.. On a side note if you create a business and do not incorporate, then if someone attempted to sue you for whatever reason, they could go after your house, your car, etc.. Whereas if you incorporate they can only target company assets and not personal assets. But then you have to deal with payroll (you need to get paid, but the money isn't yours its the corporations), taxes, whether or not you turn a profit, etc...

So while I didn't answer your questions, hopefully I added something useful. The best thing I can say is get your name outthere. Keep track of stuff you do and document it. Get a site up with the info on it. Get your self regestered with search engines, with whatever meta words you think are appropriate. See if there are charaties that need help, as this could lead to decent word of mouth proprogation with local businesses in your area.

Best of luck to you

/* And the Creator, against his better judgement, wrote man.c */