FTC Petitioned on Data Profiling
I agree with you entirely.
Up until now, except for the fact that big companies have been able to threaten little companies into handing over domains, when these cases have actually come to court, domains wouldn't be handed over unless there was a good reason (according to the court) - using them to extort money, ridiculing brands or if the domains are really famous (ie. McDonalds, Panavision etc - I know this isn't fair but since when did fairness have anything to do with the law ;) )
This is compounded by jurisdictional problems - If I am in Australia for example (which I am) what if I register xyz.com which is famous in Australia but not in the US (who have a famous xyz company of their own).
Should the US company get it? Should it depend on who registers the trademark first (note the US and Australia have reciprocal trademark agreemets)? should the fact that a xyz.com.au domain is available effect the argument (as xyz.com is more lucrative - especially if xyz Australia is an international company)? etc.
These are hard questions, but at present, the Courts (notably the US, UK and Australian Courts) have delt relatively sensibly with these issues - As you suggest legislators just blundering in without looking at all the issues (especially with tacked-on legislation such as this) can only create problems and, as you say, will probably benifit big businesses over small.