Is meeting people on the street the only way to make friends

SpotPass is the generic name for any passive Internet feature on the 3DS, just like StreetPass is the generic name for any passive local wireless feature. SpotPass features are indicated via a blue LED and blue dot on icons, like StreetPass features are indicated via a green LED and green dot on icons.

SpotPass works via scanning for accessible wireless routers when the 3DS is closed. If it finds one, it synchronizes data for any games you have SpotPass-enabled. For some games like Kid Icarus: Uprising this is basically just an "Internet StreetPass" but other games like Samurai Warriors Chronicles have used SpotPass to distribute free DLC to early purchasers. Non-games like Nintendo Video also use SpotPass to get updates.

Mario Kart 7 does add people to your StreetPass Mii Plaza population if you've played online with them, although as you noted you can't use them in Find Mii, nor Find Mii 2 unless you pay their hiring cost. I wouldn't actually call this SpotPass, but since it's a term Nintendo made up who knows if they want to call it that or not.

Nintendo has distributed other items for StreetPass Mii Plaza over SpotPass. A new Kid Icarus: Uprising puzzle panel, and a single piece of it, was sent to everyone on February 27th. And on the one-year anniversary of the 3DS's release, Satoru Iwata (in Europe and Japan) and Reggie Fils-Amie (in North America) will visit your plaza after arriving via SpotPass. They do have puzzle pieces and can be immediately used in Find Mii, and will give you the achievement for meeting a Special Mii.

It works when you hold down L+R+X while paused. If it doesn't calibrate, the batteries are dead.