I have often wondered about this too. I know it is an old thread but I had thought about asking something similar before I saw it. Here are my thoughts:
1) There is price-time priority in most (all?) equity exchanges, meaning whoever places a limit order at a price first gets their order executed first. HFTs seem to change their mind and move quotes very fast in response to the very latest info. So if you are a slower trader but are willing to commit to a price early and stay there, you will be filled ahead of traders with ultra-low latencies that change their minds a lot. But as mentioned above, this will include trades where you would have like to have pulled your quotes before they are hit.
2) OTC dealers in illiquid products can make money without speed advantages - they often trade on the phone. There are some advantages they have that a market maker in an electronic market would not, but maybe they have some practices that could be duplicated. They try to avoid trading with informed counterparties (i.e. avoid buying from someone who tends to sell just before the price goes down, etc). You would not be able to do this, but maybe you could identify time periods when you are likely to be up against better informed traders and pull your quotes. Also, they do not rely on being able to get flat quickly like HFTs. They instead carry inventory for relatively long periods and hedge. Maybe you could do this if a stock was easy enough to hedge with liquid stuff.
My guess - you could not compete with the fast guys to be a big player but it might be possible to find stocks where you could profitably deploy a limited amount of capital with the right strategy. If the stock is liquid enough to do any size this way then the spreads would be too tight to make any money and it would attract more attention from informed traders. But I am just reasoning through it and have never tried, would be very interested in hearing other perspectives.