I think the entire DNS system needs to be out of the hands of government bodies of any type, preferably relying on a cooperative, distributed solution, like the internet itself (theoretically) does/can.
I think it is amazing how divorced from US law the US government has become. Seizing domains without having previously gotten a conviction for a crime is against the law, and the idea that a DNS lookup is the same as "routing all traffic thru the US" is absurd as well. DNS records are cached globally.
I'm afraid that the solutions will have to be technical, and not governmental.