"So how am I supposed to take a 2 year old child on a 12 hour flight - with no activities and toys (not even a teddy bear because it isn't an essential medical requirement)?"
"I'm not sure what your saying but I wouldn't get on a one hour flight without a bunch of things to entertain my children let alone a 12 hour one. No toys no fly."
Not just for children. No book, no iPod, no fly for me, too, when flying for pleasure. I'd rather drive to my weekend break (already an attractive option for Paris and Brussels, allowing me to take more kit, bring back more wine, chocolate, etc. and giving me mobility when I'm there). This kind of 'precaution' is going to hit airlines (and by implication aircrew too) very hard.
And when flying for business I will usually have cameras and/or a laptop, and it's simply not on to expect me to subject these to the treatment that hold luggage gets. Airlines will have to provide some separate means by which fragile, high value items can be carried with confidence, or they will see a reduction in passenger numbers among those who pay (or whose companies' pay) premium fares.