You hit it on the head there...it's not the paywall, as is is the height of the paywall.
I wish more sites would follow the "app model".
Free with somewhat intrusive ads
Cheap, but with tasteful relevant ads.
Reasonable, and now with no ads.
I can think of at least 20 sites that I'd be willing to throw a dollar or 5 at to be add free for a year, and a handful that I'd do $10-25 a year.
In fact, while newspapers may have a problem charging for access, most magazine content is unique to that source, and magazines shouldn't have much difficulty moving those subscriptions online. For example, Cook's Illustrated just nailed me for $17.50, and that's after getting a half price offer in email.
Paywalls are workable, but they need to be like valet parking, not like locks.