These are valid questions. I am a graduate student in the program so it won't surprise you that I will advocate for it, nonetheless, if you'd like to double check my claims, you're welcome to.
Let's go in order:
We are hoping that the next major breakthrough does come from ITER: the first burning plasma. But it is BECAUSE of the fact that a machine like ITER has such massive characteristics, both in plasma parameters as well as engineering challenges, that we need the smaller machines to survive and thrive. With ITER, the international community is reaching unexplored territories and we need as many flashlights to point us the way forward as possible. C-Mod has many characteristics that resemble what is planned for ITER: high magnetic fields, diverted operation, good control of edge localized modes (the latter of which must be held well under control for ITER to operate), etc. These conditions are found nowhere else in one machine. On top of this, we are the primary educators of fusion scientists in the country (with constantly >30 students being trained).
If DIII-D or NSTX had been shut down we'd also been up in arms. The fact is that the domestic program is being fatally wounded and that's bad for ALL of fusion, and specifically, for all of the US programs. We're not only fighting for Alcator C-Mod but also for the recognition that if we don't invest in the domestic fusion program, we will be renting the technology (and contracting the scientists) from Europe and Asia since we will have no US capabilities or standing in the fusion community.
It might sound hyperbolic, but the commitment to ITER calls for an increase in US contribution for several years and if we do it on a flat budget (as is proposed for FY 2013), we will be chipping away at the program until it is no longer. BTW, here's a quote from Prof. Ray Fonck from the University of Wisconsin, Madison regarding the proposed budget: "To have a 10% operating budget is kind of insane…I understand where it's coming from, but we're already under utilizing our facilities." Not many people in the field have been public (it's only been 5 days), but the institutions are all very interconnected and the outrage is felt all throughout the field, including in the ITER leadership itself. They would be losing a major source of scientific research focused on predicting and improving its own operation.
About fusion as a religion. It's not a matter of believing in fusion. We make fusion everyday in C-Mod and in many other tokamaks around the world. The advances towards burning plasma conditions have grown at a faster rate than even Moore's Law (not an exaggeration). But the obstacles to making it work in a burning fusion reactor are, to a great extent, engineering ones ($$$). The path is there, it's lit, it just has a hefty price tag. But we, as a society, have to stop regarding fusion as a pipe dream just because it isn't around the corner. Fusion will not be ready before the next election cycle, nor before the one after that, and we don't have a clear and obvious competitor like the US had for the Manhattan Project or the race to the moon. But if the US is serious about our energy future (and by our, I mean the world's, not just the US'), we believe that cutting what adds up to ~1/100 of a percent of what the FY 2013 budget allocates to DOD alone is shortsighted and counterproductive (and that's for the whole domestic fusion program, not just Alcator C-Mod).
This might be a bit tl:dr, but I feel I haven't even scratched the surface. If you're still reading this, and have the stamina to read some more, we're constructing a very informative website regarding this issue: www.fusionfuture.com. Please feel free to browse around and if you still have more questions, keep on posting on this thread or comment in the website's comment boards. There is one thing I agree with you on completely, I don't think enough advertisement for fusion research is available to the general public. We aren't as sexy as a cool new power source which will be available in a couple of years. Nonetheless, I think that as people learn about fusion and its potential to change the energy frontier, we get more than a few second looks.