LMC - Yes, Factory farms ARE the norm. They have taken over family farms in insane numbers and although there may not be that many of them, they are huge - each producing the amount of meat that hundreds of family farms used to produce.
And I'm sorry, but vegetarians and vegans are NOT having a harmful effect on the small farmers. In fact, I think they help by spreading awareness of animal cruelty and unhumane farm treatment, which then causes people who DO eat meat to demand better treated animals - and this works! Just check out the number of organic farms, and even agribusiness which has gone into organic production of milk and meat because the market demand is there. And the more people buy consciously, the more often they are going to buy from small farmers since they tend to have much more humane ways of treating their animals.
I'm a vegan and I buy from small organic farms as much as possible for my fruits and veggies. If I ate meat, I would do the same, and I greatly respect meateaters who do so. It certainly sounds like you do, so thanks! Your heart is in the right place but I believe you aren't fully informed about how the majority of animals are treated in farms and slaughterhouses. I know you've been to farms and seen animals treated well, roaming about, etc. Most farms that DON'T treat animals well will NOT let you in to see them. They know what you would see and wouldn't want it. You should read Fast Food Nation and Dominion - not to convert you (the author of FFN isn't vegetarian) but just for you to see how the majority of farms treats both the animals AND the human workers. The slaughterhouse industry is the *worst* industry to work for if you are a human for injuries, accidents, etc. along with psychological problems. And no, it isn't cheaper to raise animals in a free-range way - otherwise the large businesses would do it. For example, it costs one penny to use a bolt gun, which renders the cow completely inconscious when actually killed. But most factory farms don't use them. Why? Because it's too expensive! I would pay an extra penny for my meat if I knew the animal was treated better - most people would, but they don't want to deal with it.
Please take some time to do research in this area - I think you'll find that boycotting those large corporations (i.e. "farms") is very important and they do marketing research to find out what people want. When they know the market demands better treated animals, they do it because it will make them more money.
Oh, and "organic" labeling originally refered not to the treatment of the animals but to the food and medication given. However, some of the organic laws now DO refer to the treatment of animals. And you know why? Because those great organic farmers you spoke of demanded it. They felt it was important. So for example, poultry and eggs from those poultry labeled organic must, besides having no antibiotics, hormones, etc. in their bodies and no pesticides in their food, have access to outside ranges that include natural vegetation. And while the big industrial farms tried to lobby against this, the small farmers who were on the board overwhelming voted it in, 12-1. So I think the opposite is true, given the fact that people want meat that is healthier and treated better, the small farmers are actually forcing the large ones to conform to their standards. And this is better for everyone!
So I think this is the better way you were speaking of, and I am certainly happy about it!