The solution is to realize that high-frequency traders are playing a different game than you, even though they're on the same playing field. They do weird things but it's probably not hurting your returns. (It wasn't HFT that imploded the big banks, Enron, and Worldcom, right?)
I'm not so sure. The financial system is a nonlinear dynamical system. The hallmark of such systems is that small local perturbations can lead to very large changes in system-wide state. High-frequency trading vastly increases the number of small perturbations, and while most remain local, there is a finite probability that some will percolate upward in scale. So micro-scale trading may increase our exposure to catastrophe.
Is there a magic money tree? That involves a lot more economics classes than I took, so I won't even attempt to answer.