I suspect you're correct that any big investors will stay away until the dilution stops, however when (and even whether) that will happen may not be determined by the company, and when (if) it does stop, the number of shares outstanding and the price will have a large effect on anyone's ability to "run it up".
The scenario that would worry me as a big player is described in the 10Q (I added bolding)
"In order to raise working capital necessary for operating the business, the Company, we entered in financing transactions that can be settled by issuance of new shares of our common stock. There are a large number of shares underlying our convertible notes, convertible preferred stock, and warrants that may be available for future sale and the sale of these shares may depress the market price of our common stock. The continuously adjustable conversion price feature of our convertible notes could require us to issue a substantially greater number of shares, which will cause dilution to our existing stockholders. Our obligation to issue shares upon conversion of our convertible notes is essentially limitless. The continuously adjustable conversion price feature of our convertible notes may encourage investors to make short sales in our common Stock, which could have a depressive effect on the price of our common stock. The significant downward pressure on the price of the common stock as the selling stockholder converts and sells material amounts of common stock could encourage short sales by investors. This could place further downward pressure on the price of the common stock. The selling stockholder could sell common stock into the market in anticipation of covering the short sale by converting their securities, which could cause the further downward pressure on the stock price. In addition, not only the sale of shares issued upon conversion or exercise of notes, warrants and options, but also the mere perception that these sales could occur, may adversely affect the market price of the common stock. If we are required for any reason to repay our outstanding convertible notes, we would be required to deplete our working capital, if available, or raise additional funds. Our failure to repay the convertible notes, if required, could result in legal action against us, which could require the sale of substantial assets."
I don't know how much is currently outstanding in the convertible notes and at what price it's convertible (market, discount or premium to market), nor who holds the convertible notes (if it's a large existing investor it may not be in their best interest to see the stock price decline), but a floating convertible price can result in exactly the "death spiral" described here where a falling stock price causes more shares to be issued (at a lower convertible value), which further depresses the price and causes even more shares to be issued at the next conversion, ad infinitum. This would be exacerbated by short selling the stock by convertible note holders.
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