1) Banks would determine they need to replace the revenue from all the fees. This means either lowering interest rates, eliminating services, charging a monthly fee for all formerly free accounts, or hiring less people. (We're already seeing a lot of this under the Dodd-Frank legislation).
2) ...forget option 2. Initially I was going to say the small-claims courts would have a backlog of claims filed by banks against those who aren't paying the fees...but the filing fees would likely be more than a bank wanted to pay, unless someone had quite a few overdrafts.
Simple thing is, a checking account is not a credit card account. If you have one, you should know enough to know how money works.
Are overdraft fees annoying? Yes. We've all had to pay them. But under the current system, we all have a choice as to whether or not we pay them. The simple choice is: balance your checking account. Punishing the banks for an individual not taking responsibility for his or her own money is shortsighted at best, and unsustainable at worst.