I find this hypothesis to be a little too clean, a bit of wishfully rationalistic sleight of hand that ignores the huge role that psychology, folklore, and culture in general play in forming people's approaches to medicine. Incidentally, snake oil has gotten a bad rap, says Scientific American.
Nate: 
Behavior | From eating vultures to clear up syphilis to treating H.I.V. with garlic and beetroot, quack medicine persists in folk remedies around the world, writes Ewen Callaway in New Scientist. Now an Australian study describes the cascades of human gullibility that help explain why.
Put simply, person X uses snake oil to treat her goiter, arthritis or what have you. Seeing this, friends assume snake oil works and more follow suit. Since it doesn’t work and X persists in using snake oil, more gullible people are exposed to the folly and fall for it than if X had been quickly cured with effective treatment.
Four out of five hucksters couldn’t have done better. [New Scientist]