"Singularity related articles and worries about "good" AI building makes me a bit uneasy when the performance of machines on many important tasks, e.g. object recognition, is dismal. So we have quite a way to go."

Yudkowsky (2008), "AI as a Negative and Positive Factor in Global Risk" http://singinst.org/upload/artificial-intelligence-risk.pdf addresses this in section 7 (though it's really worth it to read the whole paper): "The first moral is that confusing the speed of AI research with the speed of a real AI once built is like confusing the speed of physics research with the speed of nuclear reactions. It mixes up the map with the territory."

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"in (2) how do we define the "upper limits of intelligence", when even defining intelligence is problematic."

Given the huge number of reproducible cognitive biases humans are known to exhibit (http://wiki.lesswrong.com/wiki/Bias), it seems very unlikely that humans are optimally intelligent (one way to define intelligence, from the Omohundro paper below: 'We define “intelligent systems” to be those which choose their own actions to achieve specified goals using limited resources' so "more intelligent" means better at achieving those goals using limited resources)

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"(3), I don't know what sort of "economic arguments" are meant but as we all know becoming "more intelligent" is not a simple hill climbing process, in fact it's not clear how to go about it."

Omohundro (2011), "Rationally Shaped Artificial Intelligence" Makes the case for #3: http://selfawaresystems.files.wordpress.com/2011/10/rational... (summary: by "more intelligent" we mean "more capable of achieving goals." So any AI which has goals will act to become more intelligent so that it can more effectively achieve those goals)