WS: I am not sure what you are arguing here. Is it that choice is actually bad because of transaction cost? Or is it that the available choices are not actual choices but a ruse designed to disguise crowding out alternatives?
I think that both arguments can be easily answered. First, transaction cost does impose constraints on the number of options available, so it actually plays a positive role. It can be argued that optimal number of options is determined by the balance between transaction costs and the utility obtained from choosing different products.
The problem is that such transaction costs are often transformed into an "overhead" which is then passed on the consumer regardless of any choices they may make. For example, building a mall is fixed cost that is passed on the consumer in the form of rent for commercial space. What is more, driving to a mall is also a "fixed cost" that the consumer incurs regardless of whether she buys anything. But once you get the merchandise and customers into the mall environment, there only constraint on the variety is available space (assuming there are no fixed deals to keep certain types of merchandise out). In other words, the mall does not reduce transaction cost associated with choice by much (people still need to physically go through piles of junk), but it forces retailers and customer to pay it up front, and thus making them captive audience.
So the problem of being overwhelmed by "too much choice" is really a function of institutional arrangements (e.g. government subsidies) that led to the creation of a mall. Absent that, "too much choice" would not obtain, because most people would factor in transaction cost of going from place to place before making their choice.
OTOH, the internet reduces those transaction costs considerably - so a customer can indeed deal with many options without incurring much transaction cost.
As to the other argument - the issue is really semantic - defining no choice as "choice" - cf. Henry Ford's line "You can have Model T in any color as long as it is black" or George Orwell's line "Slavery is freedom."
The bottom line is that choice can be good or bad, depending on institutional arrangements in which it occurs.
Wojtek