I dunno, it sure looks like there's a lot of potential there. At least a watt or two, probably more if you spent some time coiling, casting and all that jazz. I'm no good with that kind of stuff though, unfortunately.
I think your vawt failed because of the shaft and the direct connection more than anything (sorry!). If you had an unobstructed air gap like mine does and geared it up to a smaller motor you would've had a hit. It also helps to have bearings on either end so it can deal with high winds. Also, the lighter the better - that plywood on yours didn't help matters.
I agree though that at these sizes they aren't big producers. But they're cheap and easy to make. If you had some surplus motors of the right size...I could see being able to make a 50+ over a weekend if you were set up for it.
I think you could easily go to 3ft long vanes using the same design. An unobstructed air gap makes a huge difference but making it too tall would make it flimsy. A larger diameter would be better too, maybe a 10" pipe instead.
I guess I need to revist the idea of mating a motor to it. I've got one about the right size but the pulley on it is too small...hmm..