I think that step #1 will always fail if you defiantly meet with your manager with your demands (salary, new office, flex hours, etc.). However, these things may be negotiable. In today's economy, you would probably be commiting job suicide.

I don't believe that one has to be "unhappy" to look for or pursue other opportunities. It may be a good idea to keep a resume floating out there. If the right job falls into your lap, you'll know it, and it may not be for the money, the office, or the hours.