I just want to be sure to clarify that I am not on the side of eliminating unpaid internships. But as someone who has never had an internship, paid or unpaid, (or an intern for that matter), the issues of how low paid or unpaid internships (a) affect the market for "real" jobs and (b) affect the distribution of opportunities for students had never really occurred to me.
The costs associated with the points are real and I don't think any economist would argue that. But how big are they? That, I think, we don't know. My gut is that they are not that large (since there are not that many internships out there). But it seems like a labor economist could get a good line of research out of investigate the costs (and benefits) here.
One thing I think is clear: if we decide that internships are on net a good thing, then it would be a good thing to get programs together (like Dartmouth's and Brown's) to provide financial assistence to those students who could otherwise not afford to take them. If there really is an advantage there, let's not feed them (disproportionately, at least) to those that are already advantaged.