Once again, I feel that a discussion about my general vegetarian principles is not sticking to the topic, or intended topic of the OP, but I do recognize that I have kind of led it in that direction, so I'll answer.
Personally, I have no issues about eating eggs and drinking milk as long as I can ensure that the animal was fairly treated. Free range, soil assurance, RSPCA monitored; these are the things I look for. I cannot guarantee that they aren't lying to me, but I hope that I could still trust some people in corporations. However, I do find it hard to answer this, because while i hope the hens are happy, and free to cluck all day in a field, like you pointed out, there is excessive use of the resources they provide. Chickens should not lay that many eggs a year, and cows should not excrete milk continuously. There is no doubt in my mind that this is exploitation, and it is cruel. I can only justify it by striving to maintain that the produce i buy is respectfully obtained, hence my preference for farm shops rather than supermarkets, (although Sainsburys and the Co Op are very good in this regard). In a similar manner, you may care for the environment, yet still drive the work, or catch a bus. Sure, you can reduce the output of Co2, but you will constantly know that whatever you do, you will be adding to the problem, only in smaller quantities. You won't stop using the car or bus, or stop buying plastic goods that were made in a haze of greenhouse gases, but you will be aware of the issues, and seek to minimize your impact on the situation as much as possible, finding responsible avenues and constantly trying to improve.
Thinking about this really frazzles my brain. There are so many variables to account for. I try to keep it simple where I can, but this has its own advantages and problems.
By the way, I respect your desire to start a smallholding. Very admirable achievement!
Thanks for the input here guys, I'm loving the discussion.