I have never ordered from Midway, but I work at the distribution center for a large entertainment media company so I can speak from some experience.
We pay the order pickers the same $$ per hour to pick a $500 order as we do to pick a $5 order. On a large order you can amortize the cost out. Not so on a small one. If I pay somebody $8 labor to pick a $5 part then I have already lost $3 before it even goes out the door.
Is the small order fee profit? Or course it is! They are in business to make a profit.
As long as I live, I will never understand where the belief comes from that you shoud expect top notch service and not have to pay for it
And by the way, every catalog place charges a small order fee. The rest of them hide it in the prices. At least Midway is honest enough to be up front about it.