When I started typing this I thought that was AZ, but now I see it's NZ instead.
Below are my thoughts based on USA on grid/off grid as I see it, and only my opions and such, based on personal experience where applicable.
"Can you run you're RE system for a year with no power outages at all? "
I can't live a year on grid here without a power outage, so that question I don't understand myself 
I dought I ever lived anywhere in the USA that the power did not go off at least once in a year. Even simple things like cars hitting power poles, or lighting struck the pole at my mothers house a few years ago. 2 days before she got power agian, was about a week for some people. Big city areas, big storm!!
I think maybe the grid has gone 3-4 months without an outage here perhaps. Thats if you don't count the little ones that make digital clocks flash and just beep the UPS once or twice then powers right back on. Not long ago we lost power for hours, they claimed it was a racoon that got into a sub station. 3 days without power once because of ice storm. This is ON GRID... See why I want OFF GRID myself
In the about last 2 months the traffic light and stores in one part of town was without power 2 times. The other part of town not long ago was also without power for a bit. I did not go into homes in those areas at those times, but pretty darned sure they had no power also
So around this area off grid people would be more likely to have power more often than on grid people. This is not really a remote area, just a bit rural.
Most off grid people do have a generator or some type of backup power if needed. Still on grid with this house, but I have a generator too.
"Do you use all (or most) of the conveniences of modern living i.e. dishwasher, arc welder etc?"
It would all depend on the system and RE available. Basically there is no reason you can't do anything a grid powered home can do. It takes a way of making the power, if you have poor winds, no good stream, and solar panels are very costly so probably not enough of those, then you'd be limited far more than people who have plenty of wind, or water for hydro.
If you have the money to spend and decent winds you could build a system to power a grocery store. Most people are on a budget and don't have that kind of money though.
It's cheaper to conserve power and use it wisely than to install allot more equipment, but you can do anything you can afford if you want to spend the money.
You don't have to change your life style, but adapting a little is good.
Using power as you make it is good too. When you have plenty of wind and batteries are near full charge it is a good time to run heaver loads. If poor winds for a few days you might want to wash clothes you need today, but wait for extra loads not needed right away till tommorow, no big deal. More batteries you have the more power you can store durring good high power times and the longer you can go without making power like low wind periods.
I have ran my lathe and milling machine on my inverter and batteries just fine several times and also my wire feed welder. Other more normal tools like saws and drills no problem of course. You can get 220V inverters also if you want them.
As far as dishwasher, you can if you want, but this house is on grid and does not have one anyway.
I kept the other house I rented off grid, lived on my batteries and inverters there. Since I did not own the place I could not put up a good wind gennie and had to use odd ways to charge batteries. Still did everything I wanted, ran the lathe welded etc.. No problems except I had lots of wind but no windmill flying 
I also respect those that for whatever reason would not want to be totaly off grid.
But the problem with the counties energy needs is waste, plain and simple. All the devices sold that use power when turned off? Ya, right now my scanner has the light on, WHY I don't want to use it! All this stuff with transformers that eat power while plugged in, even if the device they are for is disconnected. Scanners, printers, speakers, TV, VCR, and 500 more common items I could list.
People are too lazy to manually turn on a fan or airconditionare, they now come with remote controls, they eat power while turned off waiting to see if you use the remote to turn them on.
Manufactors claim only uses a tiny amount of power, multiply that by at least 40 for the devices in just my home alone, then by how many millions of homes, and offices!!! All that wasted power used for items that are turned off! How many people use 100watt light bulbs, then DON'T turn out lights when not in use?? Too lazy to fix the drip for the hot water facet, use an electric water tank?
That's the kind of stuff that's a major part of the problem. Waste!!
"The costs of a grid connected inverter is not that high once you deduct the cost of buying and maintaining a battery bank"
Depends what you buy for an inverter. $1,500 difference buys alot of batteries.
If you don't buy batteries what did you spend that money on, simply the ability to use your own power ONLY if the grid is working. Any power you could have made while the grid is down is simply gone, never used, your equipment was useless at that time and served no purpose at all other than to look at.
Eliminate that cost and when the grid goes down so do you, and if it's down a few days then figure the cost of the food you have to throw away also. If you work at home figure in the money you lost in income while the grid was down. Perhaps that does not matter to everyone, many homes have no backup power of anytype anyway. But if your going to pay thoughsands of dollars for a system to make power then why sit in the dark waiting for it to come on sometime just because for some unknown reason the grid is down. In the last 4 years about everyone I know all over the country has at sometime been without power for some reason for a day or more, some for nearly a week or more in winter and nearly froze. Could not even run their electric can openers so they could eat, had to figure out other ways to open cans even. New Orleans area I think had a bit of grid problems too did they not?? So think of the people sitting around there in their homes, nice power system costing tons of money, no batteries, no grid, no power. Natural disasters happen anywhere anytime, and it seems in the last 2 years we have had more than a normal amount also world wide. Many power grids have been down for many reasons.
"and the amount of energy that modest grid connected systems sell to the utility is so small the price paid by the utility is of little consequence."
Many times that is only because there is no money to be made selling power to the grid. Many places have plenty of wind often enough to make allot of sellable power. People with plenty of land in those areas have no reason to put up more windgennies than they can use themselfs, they can't sell the power for profit, so why bother.
I can put up one maybe two and meet all my needs, why put up more than I need?
I have been watching the winds here alot, I have enough land to put up many small gennies like the dans build. At least half the year I am sure I have the winds I could be selling a decent amount of power. This may not be a good area for a power grids terawatt wind farm, but 14' daul rotors would be doing very well. I could put up a dozen or more. So be realistic somewhat, $0.05 her KWHR X 12 gennies = $0.60hr X 24hrs= $14.40 a day X 30 days = $432 per month. Certainly I won't get 1kwhr from each gennie every hour, sometimes I will get more, allot of times I'll get less. So if I got less than 1/4 the posible power it's still near $100 a month I could be making. Some months it's very windy and I'd make alot more than others but it averages out fairly well around here I think, so I could stand to make about $1,200 a year perhaps. That's only 1 gennie per acre. How many could I actually fly if I wanted to and was being paid for them? 3 per acre?? 4?
So what people do now and what we would do if we had a good reason are two different things. If I was getting paid for my power I would be putting up mills and expanding. It would cost me maybe $1,000 per mill to build and raise them. Probably allot less, buying in volume for parts, pipes etc... So I am looking at around a 10 year or so payback. But since there is nowhere to sell this power, there is no reason to spend the money to make the power either. So everyone looses, clean power is not made, dirty power gets dirtier. They want to get free power from us, then take the tax breaks for RE energy they get for selling our power also.
"I see the benefit to a grid-connected system (if your location allows) as permitting you to contribute to your own energy needs with out restricting your family to the limits imposed by inverter and battery bank size."
No reason it has to be connected to the grid for that. Build your system and use batteries, run what you can on your system and everything else you run on the grid power. You always have power and your family never does without, even when no grid.
What you save by NOT buying a gridtie inverter will buy batteries. Then you do not limit your family to having power only if the grid is working. You can spend a few days watching TV while the neighbors are sitting in the dark watching thier food spoil. If the grid never goes down, well good, unlikely but good, and your still making your own power and using it too, less polution to harm the environment and all that good stuff.
If a terrorist attack or earthquake or toranado or Tsunami takes out the grid, you can watch it all on TV and tell your friends about it latter when they come by and ask how come you still have lights when no-one else does.
