Bill ...
I think there are several things to consider ...
1) I would think that in this location $100 + food, for a 3 hour gig is not a bad rate for a steady gig, especially if you are adding $30 - $50 in tips ...
2) This apparently has been a good exposure for you with future gigs being booked ...
3) Will the 'replacement' one hour gig provide the same exposure and potential?

You have laid the facts out very well ... How about a 'sit-down' with him and discuss some of the possibilities, i.e. reduction in advertizing, etc. Sometimes, local papers will advertize local entertainment (so and so appearing at xxxxx on Thursday night) with little or no charge ...
Or perhaps a limited time offer of using some (all?) of your tip $ to pay for some advertizing ...
I also think you need to establish what night of the week YOU will be there ...

In the end, I think it all comes down to what YOU see as the potential for yourself in the future at this place...
Good luck ....
t.

[This message has been edited by tony mads usa (edited 12-18-2006).]