@stangeek - can you not at least test part of your business model at the current level of traffic? Really worth getting those uncertainties out of the way... if only so you can start pivoting towards something workable right away instead of waiting a few more months.
We did a group chat product at groupflier.com and got great traction on the free version but the SMS costs killed us and we had to switch to a paid model. Happy to trade PM on our experiences if you are interested and have a blog about it at:
http://gcrawshaw.posterous.com/group-texting-is-a-telco-game
The great thing about getting money is that you can buy traction with it.
They limited some features so they can charge for them. You only get a few colors but can buy more. You get "bombs" that act as hints and can buy more.
One thing they don't do yet is have a way to share your drawing (or animated replay) on Facebook. That would be a big help. I read about a "paint for cats" iPad app (I think the one below) that added a "Share this painting on Facebook" button and it blew up his traffic. Not sure it really applies to illico but it could to a more visual app. http://itunes.apple.com/us/app/paint-for-cats/id427702410?mt...
That's one of the best lines I've read on HN in a while. I think it ought to be a mantra for app store developers.