When fund begin to request their physical silver, PSLV is toast.
Let's say silver goes to 50 and PSLV is at $20(rough estimate). Then let's suppose physical silver beings to become scarce(which could easily happen, slv ends up being a paper product etc), so funds start turning in their shares for physical. The trust then has to sell its physical and pay taxes on whatever the gain is. The existing trust holders would have to pay this tax. This would start a vicious cycle where all major holders would either dump their shares or turn them in for physical.
Why would funds redeem shares at a premium, take delivery, and then warehouse large quantities of silver, when the premium would continue to grow in PSLV, under your scenario? Only a manufacturer would need the 1000 ounce bars of silver. PSLV is a safe and economical way to own physical siver as an investment.
You only preceive this because there is no doubt in your mind that the silver is there. But at some point in the future if it actually turns out much of the paper silver that is traded is not available for delivary, people will want to have, hold and see their silver.