I think the rep system works in the best way any flawed system can. It may not be nice to see a red square, (or squares), under your Avatar, or feel put upon by disagreement, but it reflects someone's opinion. If it is then important for someone to know why this rep status is shown, for instance if a member has something for sale, then go check the reputation section to find out who repped and why. This is what I do as I cannot be sure from simply looking at the numbers.
Eidetic brings up the point about a photonic technician having limited post count but much to contribute. This is recognised already and rep is apportioned accordingly. (I actually think at 5 rep points for only just over 100 posts your rep count is reflective of that Eidetic.) Take LRSFAQ for instance; low post count but his contribution and knowledge is measured by a proportionally higher rep count.
To neg rep someone in a petty flame war is just throwing weight around IMO but, again, this is all in the reputation section for all to see and interpret, although I think you should be obliged to leave a comment, not just leave a blank. A, "Heavy Hitter", in my experience as a spectator only uses their neg rep power, (or pos rep for that matter), after consideration and, as they are aware of the destructive nature and sentimental attachment to rep, keep an eye for the future and will reverse a neg rep when appropriate. I have seen TJ do this several times to the good of the member.
Booting someone out for misdemeanours would happen with, or without a rep system. It would just leave admin to answer the calls instead of openly showing a community based opinion of conduct.
Removing the system entirely would be the only other alternative as someone, no matter what you do to it, will find fault. If removed you are back to reading all of a person's posts and seeing their post count to gain a feel for their personality. I'd prefer the abridged and more selective route of using the reputation section to assess a members worth.
In meeting some, 'other', forum members face-to-face, I can say that the, "It's just the internet", argument is totally valid. Absolutely no use measuring a real life human being in front of you on what is basically gossip.
M