Frankly, the idea of dealing with child pornography at the source just isn't going to work. You're never going to appreciably decrease demand. You've got to attack the people making it- just like with drugs. If you reduce the supply, that will reduce consumption.
Fighting the demand is tricky, and fighting the suppliers is also not that simple.
The first problem one is faced with is the draconian child pornography laws. I agree clamping down on child pornography is important, I disagree that arresting teenagers who send naked pictures of themselves to their boyfriend while being stupid is the right course of action. The laws seem to catch more innocents than offenders, and when they do actually catch someone legitimately in possession of child pornography sending him away for life (its something like 6 months minimum sentence PER image in possession, it adds up to life sentences way to easily) is not the best way to deal with it.
Second and probably most importantly is the social stigma associated with people in possession of child pornography. The general social reaction is to label them a monster call them dangers to society for being a pedophile. Personally I prefer pedophiles looking at child porn than the priests who actively molest little children. The people who are real monsters and dangers to society are not so much the pedophiles as they are generic child molesters. We need to change societies view on pedophiles to no longer be one of a monster, but of someone who needs help. If pedophiles can come out and get proper help and counseling without ending up stigmatized and thrown in jail it would severely harm demand for child pornography.
Lastly the producers, like all sex rings they stay underground and generally use illegally imported slaves. Unlike prostitution rings though, they are not as interested in getting outside customers so they are not as visible or as likely to be found. This makes it very difficult for the police to actually find them sadly. Also, you get 'family' child pornography producers where all the participants are related in one family. Basically its incestuous statutory rape, and even harder to track down than the sex rings.
One more thing though, I personally believe that confiscated child pornography be made available to pedophiles who come forward for help. Nothing can undo the harm that the children went though to make them, and I personally don't like the idea of justifying their creation. However, pedophiles cannot change their urges, and if some child pornography helps with their counseling and for them to keep themselves in check, I think using it would be of benefit.