Don't want to get away from the point of the thread too much, but, in no particular order:
Isn't a large part of what we all do about exploiting those who are less prepared, or avoiding being exploited ourselves, no matter what the market?
The us stock index futures markets are clearly traded by lots of people who have no idea where the limits are, or what the procedures are, or where the trading curbs come into play on the cash indices. Their lack of knowledge is exploited regurlarly (less so nowadays, I grant you with fewer limit moves) by those in the know.
To illustrate: "We wait for the "public" open, let 'em in...let 'em all in. If they're greedy they have put their whole position on, volume decreases after the opening trades are done. We move against them inflicting pain, confusion, doubt". Taken from something I picked up from a pit trader.
With regards to fixed odds bets, they are just binary options, which are clearly just another financial instrument. If they suit your trading style then so be it. However, I grant you that fundementally they serve no legitimate purpose other than as a speculative instrument.
I would say that it is difficult, but not impossible to create a "trading plan" for such markets/instruments. The pricing mechanism for binary options is disconnected from the underlying market sufficiently that it can be difficult to assess potential "targets" where you might exit a trade. i.e. a move in the ftse of 5 points frequently leads to a disproportionate move in the price of the binary option.
Generally speaking I think that profitable trading in binary options or fixed odds financial bets is about being a buyer and seller of volatility with price being secondary. As such, if you have a trading plan based on trading volatility then clearly these instruments are as usefull as traditional options. If like me, your trading plan, and risk/reward matrix is based on price movement then these instruments would be largely inappropriate. Horses for courses, I suppose.
A betting exchange is no different than any other market. In the same way that Chicago impose a levy on every lot traded, an exchange charges commission (only when you win, so doesn't apply to me very much.....). However, Chicago also has locals in the pit that control the "auction" and price discovery process a great deal of the time. Some of these guys make money by scalping, some by trading as we know it. But additionally, they employ various techniques such as leaning, up-ticking, call 'em what you will for giving them an "edge". An experienced user on a betting exchange uses lots of similar techniques to similar effect (and just as profitably).
Would I choose to do it? No.... it simply wouldn't suit me. However, that fact that some people do wouldn't put me off using an exchange, if it's appropriate, anymore than getting a lousy fill in the S&P pit.