Just finished reading this thread, definitely some great points made here. I'm actually quite surprised and impressed that so many people are willing to share their ideas.
I too have thought about a similar idea, targeting small businesses who don't yet have a presence on the internet. The thread title really does make sense as there are so many businesses who realise that going online is essential, but just don't have the means/knowledge on how to do it. But you don't need me telling you that.
I see that most of you guys are choosing niche's in rather large cities (well they're pretty damn large to me, I'm in New Zealand where the entire population is 4.1m). About how large would your target market be?
e.g. Your niche is dentists. Are you going for the whole city (500,000+ people) or just suburbs?
Competing with the yellow pages looks awesome to me, their advertising prices are insane. One idea I had was perhaps not concentrating too much on being another Yellow Pages, but being something more? Hard to explain and you guys are probably already thinking that in the 200k thread anyway but I'm going to try create a different spin on it (no spinning as such has been done yet, I'll definitely post up what I come up with however).
Sorry if I haven't really given much back to the thread but I'm just starting out so can't really give any informed information as of yet!
Cheers, hope I don't get axed from this forum as you all seem like a sweet bunch of people.