People will flame you because every one of your issues has been covered many, many times here (and in the FAQ). Since you're from Seattle too, I'll take pity:

I think the main problem is that you've started overthinking - playing B&M, where table image can actually mean something, can cause that. You should be able to do very well at .5/1 even if you NEVER give anyone credit for reading your hands.

Yes, bad beats are plentiful. You compensate by betting and raising for value, so that even if you beat the chasers once in 10 hands, that one hand nets you a profit.

You see AA vs. KK more often online because you see ALL hands more often online. At some tables you can be dealt four times as many hands as at a B&M table.

Shuffles are more random, and collusion less common, than in B&M. And at the .5/1 limit, you should be concerned with neither. I routinely place lucky-drawing donkeys on my buddy list and check up on them. Without fail, I later find them losing big. So much for the "he must be tracking the shuffles" theory.

Tournaments are filled with people gambooling on the premise that if they don't build a huge chip stack by going all-in five times right off the bat, there's another tourney starting in 15 minutes. Again, I usually make a note and check up on people who bust me with junk hands, and with few exceptions, they don't make it close to the final table.

Right now you're suffering from what we call a "small sample size." Get 20,000 or more hands under your belt online (you're using PokerTracker, right?), and you'll find both that it all evens out, and that you've got the hang of online poker.

As for the players being better online, yes, they are, but from what I've been told, if you're used to the Seattle-area B&Ms, the online players are not THAT much better.