It's been a long time since I read some interesting papers on the subject, but I would suggest that what's important to recognize is that nothing in the Constitution gives judicial rulings any authority above that of the Constitution itself or laws passed thereunder. Not all statutes passed by Congress are legitimate, and if Congress passes an illegitimate statute (e.g. one which would violate the Constitution) such a statute has no legitimate authority whatsoever, and so the Court has the authority and duty to overrule it. That the Court has the authority to overrule illegitimate statutes does not imply that it has the authority to overrule legitimate ones.
As for the legitimate scope of 'judicial legislation', imagine that there is a jellybean-counting contest. Contestants A, B, C, D, and E submit guesses of 1000, 1001, 1002, 1003, and 1004 jellybeans, respectively. According to the rules, a person appointed as the official jellybean judge is supposed to designate as a winner the person who is closest to stating the number of jellybeans in the jar. That person examines the contents of the jar and finds 500 perfect red jellybeans, 501 perfect blue jellybeans, half of a red jellybean, half of a blue jellybean, and nothing else resembling any part of a jellybean.
If nothing in the rules says anything about how half-jellybeans should be counted, the judge would have to invent his own rule. Maybe count only whole jellybeans, maybe count anything that's clearly part of a distinct jellybean (since the two halves are different colors, they are clearly not halves of the same jellybean), or maybe count the two half-jellybeans as one whole jellybean. Absent something in the rules specifying otherwise, the judge would be perfectly within his authority to select any of those counting methods. If, however, the contest sponsors decided to explicitly specify a counting method for succeeding contests, they would be within their authority to do so without regard for the method chosen by the judge, and the judge would be required to abide by their selection in future contests.
Everything you've described ascribes power to judges that they do NOT have.
Short of Constitutional Amendment (which, according to your interpretation, would also be subject to the whims of the judiciary), it grants to judges the final and absolute authority to determine what is legitimate or illegitimate according to their view of the Constitution.
That is NOT their power. It is NOT their job. It is NOT their right.
It is the right, the power, and the job of the people.
Since Marbury, the people have foolishly chosen (through their representatives to Congress) to allow this power to be (unconstitutionally) delegated to appointed (i.e. UNelected), life-term judges. Should the people continue to allow their right to be usurped by the judiciary, there's nothing anyone can do about it. But this stupid choice does not change the fact that -- according to the principles that underlie the Constitution -- determining what is Constitutionally legitimate or illegitimate is the right and the power of the people, and the people alone ... and NOT the Judiciary.
There could have been included in the Constitution additional checks and balances designed to prevent exactly this usurpation of power by the judiciary. In fact, such checks on the power of the judiciary (although not specific language) were suggested ... indeed, demanded. Those suggestions and demands were ignored and we got what we now have -- judicial tyranny.
Nevertheless, to say that this power lies correctly, properly, rightfully, and justly with the judiciary is WRONG .... dead, flat wrong.
Besides which, it avoids my original question.