Earlier quoted context omitted.
Not really. Android is sometimes used on tablets that can't send SMSs, or you could be out of range or even in airplane mode. Just return the same error code you would if there was a physical problem and continue.
Um no... the application would not just receive the same error code unless Google specifically set it up just for that permission, and that strategy wouldn't work for any other permissions. Think about it, the manifest specifies that the application will have access to whatever it asks for... the application would just crash when the VM/kernel denies it access to other applications data or some system permission beca…
In some cases, such as accessing the contacts or a directory on the phone, you could simply return an empty list. If you don't have write permissions it could tell you that there is not available space (or that the directory is read-only, etc).
I doubt it would break too many apps. I am actually more concerned that it would effectively become the way to turn of adds.