I think the system needs to be designed to try to keep the price as close to $1 as possible. We dont want to expect that bitUSD is usually 1.05 or 1.10. Ideally we want it to be about $1.00 to $1.01 almost all the time.
You missed the point entirely. Never again mention a price without specifying a quantity. You need to peg a high enough volume of BitUSD to $1.00 for it to be a meaningful number.
If the lowest short is $1.10 and there is a $10 buy order at $1.09 and then a $10000 buy order at $1.00 the "price" is $1.09.
In reality there is a $0.10 spread and everything in-between is meaningless noise.
Feed producers need to consider what the order book would look like if someone dumped BTS worth 10% of the BitUSD on it over 24 hours. This tells BitUSD holders that if they own 10% of the BitUSD supply that everything they own can be priced at $1.00.
If I have 100,000 BitUSD right now.... and I sold it for $105,000 worth of BTS and then I sold the $105,000 BTS for USD (or BTC equivalent) I would probably get $50,000. Now the fact remains that those who hold BitUSD are not selling even though most of the shorts currently have a "instant force settlement" at the price feed. This is GOOD for BTS because it is supporting the BTS price.
Bottom line, when you look at the BitUSD price, the quantity available over $1.00 is VERY SMALL and thus meaningless. That means that right now BitUSD is "perfectly pegged" and the premium for creating new BitUSD is VERY HIGH. This is a good and healthy position and indicates what it will look like with force settlement enabled. Everything else just depends upon trading volume and market making.