Admittedly, I haven't read this whole thread, dang I'm lazy. But from reading almost the whole first page, I've come to this:
I understand the new photographer who will work for (nearly) nothing. After all, it is advertising, right? But I stand by the POV that we MUST NOT UNDERCHARGE! You can still undercut the competition (usually, and by comp I mean pros not the freebie photogs we're trying to rid the world of!). Believe in yourself. I'll say that again: believe in yourself. Don't feel "bad" about charging a set rate. Guess what? People are probably going to pay it!
Just this morning I had a garage sale and was trying to sell a lot of about 5 sports items (same item, different teams). I was going to sell all for $5 (not marked), but a lady only wanted 1 of them. She asked, I stated $5 (why not try?). She said no. I said $2. She paid it, and said "but its not worth it." Did I feel bad? NO NO NO! It obviously WAS worth it, or she wouldn't have paid it! If it wasn't worth it and she paid it, then why should I feel bad because she's "dumb"!?
As for building your portfolio - these are my suggestions and things I've done myself-
If you're into any type of portraits, do a TFP (time/trade for prints, or alternatively TFCD). You get pics for the folio, they get pics to take to an agency. You both got what you wanted, and neither person devalued their service. (see
http://www.modelmayhem.com if you're interested in this)
If you're not doing portraits, find people to shoot who would otherwise NOT be seeking your services to pay for. If you're volunteering your services for someone who otherwise would NOT be seeking a photog, you're lessening your impact on devaluation. Also, if you make it clear your intentions (IE: these are a limited "free" series for purpose of your folio only - read up on releases, etc) then you may even have CREATED a potential source for VALUED INCOME at a later date, assuming they liked your work.