* Standard Mandarin has a surprisingly small number of distinct syllables, namely about 400 when tones are ignored, and 1300 with tones. English has about 7000 to 15000. So, homophones are a bit more of a problem in Mandarin than in English.
* English disambiguates some homophones in writing (where/were, there/their/they're, and so on), though as less literate people increasingly demonstrate, one can communicate reasonably well without these disambiguations.
* Spanish has an extremely close correspondence between what is written and what is said, and only disambiguates a very few words (typically question words) with an accent, and the writing system works just fine.
* Given that spoken Mandarin works, and disambiguation of homophones in alphabetic languages is only sometimes done, I am personally convinced that some sort of alphabetic writing for Mandarin is absolutely feasible. That might be Pinyin or Bopomofo or some variation thereof.
* Personally, I find the Chinese script very beautiful, but a colossal waste of time (think of the billion of poor kids that had to learn it).
* Would switching to some sort of alphabetic system cut people off of their cultural heritage? Maybe somewhat, but I'd argue it's mitigated by two things: a) Classical Chinese is in fact so remote from modern one that you have to study it anyways in depth, if you are into it. You could still do that, if you are into it. b) Nearly nobody speaks Latin anymore in the West, the horror. Are we cut off of our cultural heritage? Well, somewhat, but there are translations, and if you're really into it, you can still go and learn it, see a).
Great resources on these issues, btw:
* "The Chinese Language: Fact and Fantasy", John DeFrancis
* "Asia's Orthographic Dilemma", Wm. C. Hannas, extract available here http://www.pinyin.info/readings/orthographic.html
* Pinyin Info, http://www.pinyin.info/
* Language Log, http://languagelog.ldc.upenn.edu/nll/ , in particular Victor Mair's posts
Also, writers commonly make up their own written forms of words on the fly, especially for technical and academic writing, so even an experienced reader is left struggling, trying to figure things out.
I think the real problem is that the necessary books weren't being written in the first place (or were suppressed more ruthlessly), not that the cost of printing them was too high. The massive character set meant that becoming literate required a huge investment of time/money. And so, at least in China, all the literati went into civil service jobs, and had little incentive to publish books which would shake up the status quo.
You may be interested in the book Asia's Orthographic Dilemma by William Hannas.
At least eg. Hannas - far from an impartial voice on the subject, mind - clearly distinguishes the written standard as a separate language from dialect speakers' native ones:
"By the same token, the 'unity' that Chinese characters allegedly impart to the language by allowing speakers of different 'dialects' to read a common written language turns out to be an illusion. These so-called Chinese dialects have less in common than the Romance languages of Europe, meaning that speakers of nonstandard Chinese (some 30 percent of the Han population) are not reading their own language or even a common language, but what is to them a Mandarin-based second language written in Chinese characters. Granted the characters allow non-Mandarin speak- ers to read segments of written Mandarin in their own regional pronuncia- tions. But, far from unifying Chinese, this practice only perpetuates differences that would have been leveled out long ago under the influence of a phonetic script."
— Hannas, Asia's Orthographic Dilemma, Ch.8, Appropriateness to East Asian Languages
http://pinyin.info/readings/texts/east_asian_languages.html#...
* Pinyin Info, http://www.pinyin.info/
* Language Log, http://languagelog.ldc.upenn.edu/nll/ , in particular Victor Mair's posts
* "The Chinese Language: Fact and Fantasy", John DeFrancis
* "Asia's Orthographic Dilemma", Wm. C. Hannas, extract available here http://www.pinyin.info/readings/orthographic.html