"I don't deny that there are iatrogenic problems, but not it's not true for every birth"
No. I agree! I didn't say or imply that this was ALWAYS true, I'm just reflecting on some of the stories I've heard from people who have struggled with breastfeeding after difficult/operative births.
"Other than that, breastfed babies are more likely to be jaundiced than bottlefed babies, but I've never seen that uses as an argument against breastfeeding."
I'm not using the higher rates of jaundice found in babies born after instrumental births as an argument against instruments being used in birth.
"And the solution to breastfeeding issues is not altering the mode of delivery."
No, of course not.
"As for 1-1 care - would be great in an ideal world"
No - not an 'ideal world'. Some hospitals are already managing this. I agree there are finite resources, but that's never used as an argument for restricting the availability of epidurals for labouring women, despite the fact that epidurals are not linked to better clinical outcomes (worse actually), whereas providing one to one care is linked to better clinical outcomes for mothers and babies, which decreases overall costs to the NHS.
"(although surely it's 2 mw's per mother in homebirth?)"
The second midwife usually only stays an hour or so for the actual birth. You also have to factor in that mothers who labour at home have about half the rate of c/s, compared to similar low risk mums labouring in hospital. They're also less likely to need an epidural. Both these things mean that homebirth has economic benefits for local providers of maternity services.
" I guess it's probably easier to run a labour ward economically than making sure that there will be enough midwives to tend to all women who might go into labour at the same time at home."
It's easier to continue with dangerous levels of understaffing if you have all the women in one place. I would prefer for the government to accept that it's unacceptable for staffing levels to be so low that women and babies are put at risk, and do something about it.
Have to say, this issue is of real interest to me at the moment. My local maternity unit is currently being investigated following 3 maternal deaths in the space of 8 weeks last summer. At least one of the deaths is known to be the result of malpractice, and the Quality Care Commission has flagged up dangerously low levels of staffing at the hospital as being part of the problem. 
As for homebirth provision in our area - we have a specialist caseloading team who only do homebirths. Women here who opt for this pattern of care are IMO making a very rational decision for themselves and their babies, given the poor provision currently available at our hospital.