The real challenge becomes, however, how to translate the spectrum of intent granularity and volume to action in Display targeting. With behavioral targeting, geo targeting, contextual targeting, semantic targeting, et al. what can marketers do to efficiently move across this spectrum with their display strategy?

My (biased) opinion is that dynamic ads, when delivered through a good DSP are a good platform for moving through the intent granularity / volume curve. Where granular intent exists, dynamic ads can deliver the right specific product for that intent. For audiences with less defined intent, the dynamic ad can show a more general message.

Once again, great analysis!

One of the reasons I like your analogy is that, as in search, it's not always easy to know ahead of time whether you've got a head/tail/torso audience, and they don't always behave as you'd expect. Accurate classification may be half the battle.