You've missed one obvious possibility: why can't the Twitterers themselves choose an advertising profile and approach, share significantly in the revenue and even set the rates? Variety and style would be compelling, and geared to an audience, rather than one-size-fits-all; plus, far less Big Brother-ish.
One of the choices should have been "I'll stop using Twitter completely".
Ads at the end of tweets would be unforgivable. Yes I would add xxx or ?!2# or whatever to use that space. context ads like gmail would be marginally tolerable since it can be amusing.