I am, as you succinctly put it, an H1-B foriegn Geek. I am going home this year. My visa goes until next May and my company is willing to sponsor me again if I wanted but I'd rather head back to the UK (don't get me wrong, I like the US, but it's note home to me). I also regualarly get offer from other campanies who are willing to sponsor me (and these offere aren't at cheap rate).
I get payed the same as my US colleagues and work the same hours. If I was treated worse than my colleagues I would have left. I think you underestimate the expense, work, complexity and time it takes to get a visa (I've done it twice now).
There has certainly been a vast plunge in the number of companies willing to do it (especially among the smaller and mid-size companies who can't afford dedicated visa teams like IBM and HP). Just how many IT jobs on Monster require a green card or citizenship.
While I don't doubt that the scheme is being exploited
one of the things you have to do when you sponsor someone is state how much you are going to pay them. While the state department makes some allowance for a company recouping the cost of the vias and relocation if the salary is significantly below the US norm for the position then the application will be rejected.
The greeater worry for the western world is not migratn workers and immigrants but the practice of outsourcing to other countries. While quality of work generally decreases (for a number of practical reasons) the cost savings are too attractive to big companies. My company lost one of it's biggest clients to an Indian firm: the client said to us (literally) "We love your work, we think you have the best people around and the projects you've done for us are the best the company has ever had. However charges a third of what you do so we are gogin to have to let you go". This led directly to 30 people being layed-off.