Jack, I don't think the ads have dropped off so drastically just because of the fees. Yes, that has an impact but the feedback you are receiving here regarding the difficulty of using the section, the lack of an integrated "user experience", and the elimination of the social aspect of B&S is actually valuable advice in disguise and not just complaints from those wanting a free ride.
I think most understand that the difficulties you mention are real - spam ads, constant bumping, price policing, etc. - but there should be ways to address each of these problems without holding a pillow over the B&S forum's face. I think the best way to maximize the income potential of the site is to reverse your thinking about the mix of a good and positive user/customer experience, versus ease of moderation and making some money.
If you set a goal of trying to put the (newly minted) customers first and adding the requirement that you start making money from the ads while keeping things tolerable for the moderators (rather than the opposite approach now being pursued), you will likely find you can make much more money from the ads. It looks like there are just a few new ads being posted everyday, unless I am missing something.
I still think that the biggest problem is not having any comment ability, but you could also likely make much more money by charging a subscription fee to sellers - or even buyers, to weed out the increasing number of scammers who are contacting members. Regarding bumping and price policing - I am not very familiar with the available addins for VBulletin, but there may be some very customizable options for reasonable prices. At the least you may be able to get help from the member community by using a "Report" button to make the task of moderation a lot easier.
Think about how a $10-20 per quarter fee would stack up against the current "modicum" of income you are now seeing. Or even keeping the current fee structure under a more usable and social format. As others have mentioned - an active, vibrant B&S will drive traffic to the site, and result in more members and more income. I for one would not hesitate to subscribe, both to support the site in general, and to use the buy and sell.
Just something to think about