Zedman has been providing some very useful corrective comments on hastily-posted rants, so I'm going to give his blog a big plug. Here's a bit on why shorting actually decreases when share prices drop.
Also lots of useful links on there like to this article which covers similar ground about shorting to my recent attempt. That in turn led me to this paper (PDF) on shorting constraints and over-pricing which looks worth a read.
On a totally unrelated point here is a great piece by Marxist economics commentator Doug Henwood which cheerfully slaughters a number of my sacred cows. Always worth reading critical voices though.