I agree with your thoughts.
I also think it might be great if we had a separate flagging power. I wrote an article on it earlier tonight. That would allow us to flag out some of the spam in places like the "Business" tag in Trending, without using up all our voting power in a negative fashion that helps no users directly (beyond the reward reallocation) and nullifies curation rewards, does not build followers, etc.
A separate power for flags would be an awesome idea. We should also require users to have a minimum reputation of 50 to flag a post so that they understand what the community values and what it does not. That would reduce flag abuse and make flags more "fair". It would also reduce "revenge-flags" because the person being flagged would lose the reputation needed for a backlash.
I definitely think Rep could be used here effectively, too.