... I currently make $1500/monthly increment purchases at 9.99 a transaction. Over the course of the year that's ~ $120 in transactions costs. The stocks that I purchase are dividend yielding stocks which I have in DRIP. Hypothetically if I get to a taxable account valve where dividends exceed my expenses then going forward my expense ratio would be zero. Am I correct to assume this scenario?
You're viewing dividends as unique benefits when they're not. You buy stocks and pay a commission, and think you get a dividend. But if you pay $0 commission to buy Vanguard S&P 500, you still get dividends. So you are incorrect to view dividends as washing away the expense ratio - it's literally the opposite. Dividends are eaten away by the expense ratio, as that's how most funds in practice extract the money to keep the fund running.
Look at it this way, after 1 year of investing ($18,000):
S&P 500 index fund with 2% dividends ($360) and 0.05% expense ratio ($9), you receive $351 dividends.
Individual stock purchases with 2% dividends ($360) minus commissions ($120) leaves you with $240 dividends.
The problem isn't the dividends - it's beating a 0.05% expense ratio with $10/trade commissions. Also, 12 purchases a year give you only 12 stocks, so you don't even wind up diversified. I think you're losing money on commissions faster than you would with an expense ratio, and you're also less diversified.