Your cycle scenario provides a nice window to see the major problem with the proposed two-way SBD peg which is that conversions (even very large conversions) can be done without directly impacting the market price, and this is the feature of the two-way SBD conversions that can be exploited.
I find it interesting that your step 2 conversion is essentially selling STEEM without the sale directly impacting the markets and your step 3 is buying STEEM with impacting the markets.
I've also written a separate post related to what we've been discussing, and I think it can be helpful for people to see both your example of how to exploit the two-way SBD as well as my example.
I agree this issue needs to be addressed. We're doing our part with trying to get the word out there. It would be nice if someone could make a cartoon video explaining the problem in simple terms that is easy to see visually.