(I'm not sure that #2 is the right formulation. A lot of people don't think in terms sufficiently close to Bayesian inference that talking about their "priors" really makes sense. I'm not sure this is more than nit-picking, though.)

I agree that #3,4,5 "go increasingly off the rails" but I think what goes off the rails is your description, as much as the actual mental process it aims to describe. Specifically, I think you are making the following claims and blaming them on the term "conspiracy theory":

• That when someone thinks something is a "conspiracy theory" they discount it not only in the sense of thinking it less likely than they otherwise would have, but in the stronger sense of dismissing it completely.
• That they are then immune to further evidence that might (if they were rational) lead them to accept the theory after all.
• That if the theory eventually turns out to have been right, they don't update their estimate for how much to discount theories on account of being suspiciously conspiracy-based.

Now, I dare say many people do do just those things. After all, many people do all kinds of highly irrational things. But unless I'm badly misreading you, you are claiming specifically that I and Brillyant do them, and you are laying much of the blame for this on the usage of the term "conspiracy theory", and I think both parts of this are wrong.

Mightn't that higher prior be itself part of their tacit knowledge and expertise

Yup. But the answer to that question is always yes, and therefore tells us nothing. (Mightn't a creationist's higher prior on the universe being only 6000 years old be part of their tacit knowledge and expertise? It might be, but I wouldn't bet on it.)

But by symmetry, it follows that those of us brought up in the West will be too reluctant to see conspiracies elsewhere.

I don't think the symmetry is quite there. People brought up in totalitarian countries who then move to liberal democracies see too many conspiracies. No doubt people brought up in liberal democracies who then move to totalitarian countries see too few, but it could still be that people brought up in totalitarian countries who stay there and people brought up in liberal democracies who stay there both see approximately the right number of conspiracies.