hi litmus
let me start with my favourite quote
...hey man, it's showbizzness. No business - no show

which applies to musos as well as to distribution (whatever channel choosen)
imho the 1-2-3
is a good business idea, for the distribution - and on the expense of the (so-called) artists...
1-2-3 doesn't pretend it can do anything for them (in facts - which is correct), yet the site succeeds in spreading a 'home' feeling among the readers - good job on that.
There's only one business example (model):
Julie goes to your concert... and she can... and she does...
if she would, I'd sell her the CDs right at the entrance of the party
sidenote: is the female customer-ess intended to please the (highly probable) majority of male musicians in a certain way ?
Most 'net performers' don't give concerts at all and even if they did, the audience would be far too small for a follow-up business model à la 1-2-3.
It is correct that the investment of 50 bucks isn't much and there's the possibility (the sooner, the more likely) to get the investment back - but well, I could better spent them at a Casino with an almost 50% chance to leave with 100.
Which brings us to Paypal a $0.3 charge to be safe plus 3% of the amount - exactly what ALL Casinos on this planet make their living from, and not a bad living btw...
In case you wonder: about 30 numbers are evenly distributed on 2 colors, but one number (zero) 'disturbs' the equality, just enough to make the bank's profit - applied statistics, nothing else.
Paypal is on the profitable side with this + 3% and 1-2-3 makes a good deal on the hopes of their customers - a similiar model as the Casinos offer, you may enter with hope, but someone else makes the profit, no matter with what you leave.
Aside from that 1-2-3 wouldn't be such a bad idea as a distribution channel, IF there was a kind of service making artists better known (simplyfied).
Exactly THAT is excluded, you'll need your own advertisement and website etc.
And it's a fairy tale that music is bought just because 'it is good'...
cheers, Tom