Dave,
So basically your model of combined blade element and momentum method predicts an FM of 0.7. This depends on the Cl vs AOA and Cd vs AOA graphs used (not shown). The general wisdom is that Cl/Cd for a flat aerofoil is lower than for a fat aerofoil. FM of 0.5 still feels reasonable to me.
The root cutout may not have a significant effect, as you say. This may be why Sikorsky/Schweizer opted to use this to avoid reverse flow divergence. I would not have thought that it would increase FM, however.
The book looks interesting, and i'll likely get a copy for reference. I think X2 has already answered Leishman's concerns about high speed rotorcraft development though. I note, with interest on another thread, that BERP IV allows the Merlin EH101 to get to 199Kts - this is worth watching...