My understanding of ESS history is a bit different. The Bell System, since it started, was constantly looking for more efficient ways to handle traffic. This lowered the cost of telephone service which generated more business allowing it to take advantage of economies of scale. This all created a positive cycle -- more business led to more efficiency and lower costs which led to more business.
In the late 1930s the crossbar switch, a powerful "thinking" switch, was perfected and placed into service. During the war a long distance version was placed into service and after the war an advanced model was developed. But the Bell System recognized early on that it wasn't enough. Crossbar was electro-mechanical which required costly maintenance and limited switching speed. Changes meant hand rewiring. Telephone usage was still growing strong. Efforts began early on to replace relays with electronics.
The problems you speak of -- external abuse of the toll network, unreliable frames -- came well after ESS prototype designs were being tested. That is, ESS was fully committed and in production by the late 1960s. Indeed, according to one writer, ESS actually caused some of the 1970s service problems since it supposedly _completely_ crashed when hit with massive call volume (don't know if that's true) instead of just slow dial tone.
Actually, Bell System exhibits of the 1960s did proclaim the speed, capacity, efficiency, and control of ESS. Computer technology and logic control were alien concepts to the majority of the population back then so it wasn't something the public would readilly understand. I would not describe it as "smooth over their real intention". Keep in mind the management of the Bell System in those years, especially before deregulation and breakup, was technically oriented and very happy to show off technical advances. Bell had travelling and permanent demonstration exhibits all over the place.
Let's face it, the typical phone user could care less what was on the other end of their phone, be it a hamster wheel or 'space age' electronics. Did they get a dial tone and reach their desired party? was all that mattered.
Actually, back in the late 1960s the country experienced a nasty fad of prank calls that the Bell System could not handle for the reasons you describe. That was no secret.
I've been in exchanges and saw such jumpers -- they did not seem to be that big of a deal. Such testing equipment (dial record keepers and other monitors) were developed along with panel switching early on for maintenance and service quality testing. If the feds had a court order the phone company complied with whatever was needed. (I think someone once wrote here the phone company would point out the proper contacts but the feds had to do the dirty work themselves.) Anyway, I strongly doubt ESS was developed mostly to serve the feds' interests because reasonable means existed before ESS.
I don't agree with that at all. As mentioned, the ability to trace calls was _desired_ by the public as a result of severe prank and abuse calls.
The new calling features were not a nickel-dime thing, but a profit center. Nothing wrong with that. You want plain POTS, fine, continue paying $4/month. You want call waiting, an extra $3/month. Customer is happy with the new feature and the phone company is happy with the revenue. People in more affluent areas liked the new features, liked the status symbol of having call waiting and putting someone on hold, and didn't mind paying the money for it.