Some would, but most people would continue to use a free service. It would have to seriously be causing the average user a pain to have them switch. More likely would be another free service that could be the gmail of years past and they would slowly become what gmail is today.

I have already moved the bulk of my e-mail from gmail to my own domain. I was expecting something like this from Google - once an advertiser, always an advertiser.

Not many, AdBlock is free. Could be a nice product if enough webmail interface providers would be able/willig to work around AdBlock.

That's exactly what I pay Rackspace Email for. My email is my most important communication medium, it's also the nexus and backup access mechanism for most of my online accounts via password reset. You'd have to be mad to leave something so important to a free service with no SLA and no customer service where you account could disappear overnight without recourse.

Zenbe Mail was exactly that: a paid webmail service with great and clean design for $3-10 dollars a month. But they closed the service after the engineers joined Facebook as part of a talent acquisition. Not sure how successful they service was in terms of revenue/subscriptions though.

There are quite a few for-pay email providers that do a great job. My favorite is Fastmail.fm, which was bought by Opera last year.