The decision we have to make is the level of resources to put in. We've tried emphasizing the honor code and putting resources into teaching quality. This leads to endemic cheating. We've tried cracking down very hard on detection, and this leads to massive work for the instructors, lots of busted students and a general "meh" from the administration. Finding the right balance is really tough.
I don't get it - it never occurred to me to cheat as an undergrad. But then I had UK-style end of year finals instead of homework-heavy classes and constant grading, and I was never optimizing GPA from class to class. There are problems with mega-finals for some students, but they sure make cheating hard.
The online services can't possibly defeat cheating. The main defence they can have is proctored exams at physical locations, which kills some of the online advantage, and even then they have the ID problem. The Open University has worked out how to deal with this pretty well but it's not cheap. The new online services can and should be different to this, and focus on the massive ultra-low-cost learning opportunities. It's going to be interesting to see if they come up with something really new, and not just distance-ed 3.0.
I think the bottom line is that a year after you "ace" a <3 month course you can't be caught because you can't be expected to remember all that much. You may be more suspect; but there are also plenty of innocent suspects.
A hierarchy of classes that truly builds works, but they are rare. Really, we need spaced repetition for as long as necessary to master the material, not a virtual version of a broken semester design. Then there is no point in cheating.