I don't see how the fee deters gaming the system. The only way I can think of gaming it is by manipulating the feed price and that is an issue only with HIVE->HBD conversion where you get the HBD immediately. However the conversion fee deters conversion and if that adds volume to exchanges and bring more money to market makers and liquidity providers, then the fee may benefit the economy.
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It deters gaming because currently if you can affect the price of HIVE during the 3.5 day period, even by only 1% or less, you can potentially make a profit on the conversion (beyond what you are "supposed" to make from HBD being mispriced). Adding a fee increases the hurdle to where you have to move the price by more than the fee. The fee also represents a direct benefit to the blockchain. When trader convert under- or over-priced HBD they make a profit. The fee means that the profit is shared between the trader and the blockchain
The challenge comes in on the other side. If one acquires a lot of HBD through the mechanism you laid out, then a price crash could put that person in position to create a lot of HIVE.
Thus, a 5% fee, which goes into the DHF, would help to offset that some. It might not stop it but it is just another obstacle to overcome.
In this situation we are describing, the 3.5 wait might be less of a hindrance if the moves are big enough.
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How is this different from buying the bottom except the price they pay is probably worse? Haircut rules should prevent producing too much HIVE for taking over the network, right?
Yes the haircut rule is another factor that helps to slow one gaming the system. However, that is increasing as the need for more HBD is going to be required.
So there is the crux, how do you set up a system where there is the ability to expand yet prevent (or at least minimize) the ability to game the system.
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