I didn't quote the text of the law, above, but rather a commentary. In hope of clarification, I followed the author's notes and looked up some of the material. Namely, section 512:
http://lookleap.com/www4.law.cornell.edu/a1

For example, the above commentary says about caching:

This exemption applies to material (a) that is originally placed online by someone other than the OSP (the "Originator") and (b) that is transmitted from the Originator, through the OSP's system, to a third party at that third party's request.

The related text of the law says:

(1) Limitation on liability.— A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the intermediate and temporary storage of material on a system or network controlled or operated by or for the service provider in a case in which—

(A) the material is made available online by a person other than the service provider;

(B) the material is transmitted from the person described in subparagraph (A) through the system or network to a person other than the person described in subparagraph (A) at the direction of that other person; and

(C) the storage is carried out through an automatic technical process for the purpose of making the material available to users of the system or network who, after the material is transmitted as described in subparagraph (B), request access to the material from the person described in subparagraph (A),

On first blush, both sound like the third party must request the material before it can be cached. I think that was the thrust of your argument. However, I believe they also apply in cases where the OSP caches the online content /before/ the third party requests it. In other words, the OSP could fetch the material from the publisher before the reader requests it. It would simply be part of its transmission.

Any takers? ;-)

However, the text of the law on caching prohibits altering the material (text not shown, here). So even if caching is okay, search engines would need another mechanism (such as fair use) to display excerpts of these pages to users.

Sid