I'm pretty happy with the current pricing model too - it is a bit weird, and could maybe be described differently, but I don't think it's a bad solution to a tricky problem. The selling price has to be fixed for the reasons Pete says.
But I would like to be able to set a retail price, rather than arrive at a retail price by adding my markup. And my retail price would be equal to the printing cost of the largest version of my model plus whatever minimum markup I decided to award myself. If the model was smaller, then my profit margin would be slightly higher. If I didn't properly specify the boundaries of the sizing parameter, and someone ordered a gigantic version, then I might end up making no profit at all, and that would be my own fault.
I think at the moment there is almost a disincentive to use co-creators because the actual cost of the model will always work out to be a little cheaper than what is charged, and so sellers think they should receive the difference as extra profit, and buyers would prefer to just pay slightly less in the first place. It creates an reason to try and work outside the shapeways selling model, if you see what I mean, and arrange the sale manually with a specially listed model instead.
Personally I am not bothered about the few cents difference that shapeways gets to keep if a customer orders a small model with the current co-creator method - I see it as a commission fee paid to shapeways for arranging the sale. But I would prefer to be able to specify a particular retail price without so much guesswork.