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Why does that help end-users? I would argue it is optimizing the wrong thing.

Because it gives a chance for end-users to be miners themselves, which in theory keeps the whole network democratised.

In the Bitcoin network today, two mining pools ( GHash and BTC Guild ) between them have over 60% of the mining capacity. There is no way for end-users to meaningfully nudge the behaviour of those pools, which in turn grants them great power over the future of the protocol and network.

Each of those pools alone has twice the capacity of the next largest ( Elgius at 700 Thash/sec ) which in turn is twice as large as Slush, and so on...

An end-user in the Bitcoin network, not owning sufficient ASIC hardware to grant 'access' to such pools, is dependent upon them.

I've also been quite curious - is it even possible to make modifications the protocol with so much of the current hashing power implemented in application specific hardware?

Yes. Hand waving because I'm not real familiar with the specifics, the hardware implements a very small piece of the protocol and needs a supervising controller to tell it what to do.

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