When do you scrap a startup due to a well-entrenched player/competitor?
pedalpete: In someways I think this could depend on the network effect. 
If you are going against a Facebook/eBay/etc., you have to consider how you can grow a significant userbase overcoming the barriers to entry (notice I strangely used Facebook instead of MySpace? - Facebook had to have had the same thoughts you had at one point).If you are going after a google(search) or Amazon, there is very little network effect (people would argue that Amazon network is built on the reviews, but reviews are available on the web).Just my two sense.