Transactions with low fees get low priority and may not EVER get verified (or mined) before being dropped from the system. Is this true?
Yes. However they can be resent, potentially with a higher fee.
That's a huge flaw in the system if it is.
Matter of opinion.
How can any kind of commerce happen with this "feature"?
You have to think about things a little differently. Sending the transaction isn't the end of the story; confirmation is. The sender has to be responsible for monitoring the progress of the transaction until it is confirmed, and to be willing to either increase the fee or eventually give up on the transaction as no longer economical. Likewise, the recipient needs to not assume that a transaction is final as soon as it's sent; instead, they have to wait until it is confirmed before shipping goods or services. Escrow services can help with this, playing a role similar to that of a credit card company.
I think everyone wishes the situation were simpler and that we had a system where nobody had to wait to have their transactions confirmed. But we don't yet have such a system, and there doesn't seem to be any obvious design that would solve this problem while remaining scalable, decentralized, and reasonably easy to transition. In the meantime, however, despite your concerns, an awful lot of commerce can and does happen with Bitcoin as it is. People consider the limitations and adapt accordingly.
I am beholden to some god-like entities (miners) for my transaction to be verified, then how is this better than central banks?
Miners aren't centralized. Anyone who buys appropriate hardware can be a miner. So there are lots of miners competing to confirm your transaction, and you can expect that it will be confirmed just as long as you offer enough of a fee. With a central bank or credit card company, they can block your transaction for non-economic reasons: you come from a country they don't like, your credit rating isn't good enough, etc, etc. In that case you might not be able to make a transaction at all, or you might have to pay more than other people receiving similar service.
In other words, transaction confirmation isn't necessarily designed to be cheap or fast, but it is designed to be fair.