I know that many people avoid buying a "ProductX 1.0" product, thinking of it as buggy and wait for polished future versions.
Instead, what about calling it "ProductX 2011" (using the year instead of version sequence);
would that be more effective and sound less risky?
Just release the product as "ProductX" and in the case of terms and conditions add the version number. I feel version number is very important that it represents the future growth. As mentioning year "2011" It typically represents that you are going to make a new release next year which says poor updating. Also version number does not need to start with 0 or 1 you can start with any number that you like. Ubuntu counts its versions as 8.04, 8.10, 9.04, 9.10, 10.04, 10.10 etc but it never counts the next number. The same its not mandatory to mention the primary number as your version number just start with your lucky number and do not write the product version number besides product name. Just mention it some where else.
All the best.
Personally, I don't like "ProductX 2011", etc, so I'd always say use 1.0, etc.
The only exception I can think of is for year-specific software, like for doing taxes, but even then, I'd expect to buy it and for it to still work (with updates) the following year.