Okay. Show me how them nibbling is more detrimental to the honest bidder than if the nibbler had bid honestly as well. In the worst case, it is the same. In some cases, the honest bidder gets the item for less, so it's actually beneficial.

Edit: To expound, you've already stated that the nibbler has a maximum amount he's willing to pay. It's your option (A) from above. First, assume that your maximum is greater than his. If he enters that amount as his maximum bid to begin with, you pay that amount plus one. If he continues to nibble away, you either pay that maximum amount plus one, or the auction runs out, and he's not able to get to his maximum amount, and you pay less. Next, assume that his maximum amount is greater. If he bids it at the beginning, you lose. If he nibbles away and gets to it, you lose. If he nibbles and runs out of time, you get the item.

In both of those cases, you do not lose any ground due to the nibbler, and, in some cases, you're better off.