The average reader does not know the difference between Vanity published vs Self-Published. Both are found at the same book selling sites such as Amazon, along with commercially published books. The average reader don't know and don't care...
If you look at the number of books published in 2009, there were something like 750,000 and only about 219,000 were published by commercial publishers, large and small. (Or so I have read, but my number may be off as I don't recall the exact figures. If they are, its not by much.)
No matter which route you go, the book has to stand on its own merits and find an audience, which seems to be getting harder and harder no matter what route you go. Why? Because like any other market, over saturation tends to lower the value of everyone in the market...
I am constantly told the cream will rise to the top. My fear - a lot of the cream will sour before it rises...