I also agree they should play the game when rating it- not to the end but the first few chapters/ levels, at least. That should give the raters enough of an idea by then. Regarding sequels, they should be judged on their own, not having any influence from what previous games have in the series.
As for the ratings themselves, the AO could be scrapped- they could simply refuse to rate a game that pushes past the considerations for M. Also, the final decision should be the raters themselves, not a higher up that hasn't been watching the footage.
As for the government, I don't know why they seem to keep wanting to bring in laws that try to "protect the children" yet they infringe more on the adult gamers- after having each one shot down you would think a different approach would be tried. Why not work with the ESRB to have the ratings enforceable and not just suggestions, with stores being fined if found infringing (say, selling GTA IV to a 10 year old with no parents permission)?