Here's what I see when I do that search: http://i.imgur.com/505yzNW.png
The fault here lies squarely with the websites. They choose to work with scum. Let them fix the mess instead of blaming Google.
You're basically arguing that false positives in an external content blocking service is better than false negatives.
I strongly disagree with that kind of notion. It reeks of nannying.
An example of this: auto insurance. When you get in an accident and want money, you don't sue the other guy; you sue your own insurance company, who sues the other guy's insurance company, who in turn sues them. If, somewhere during that propagation, an alternative is found (e.g. the two insurance companies agree that it was a no-fault collision under arbitration and settle for some amount), then you end up achieving the same effect while putting less stress on the system as a whole.
It isn't much of a choice, since they're not allowed to use AdSense or any of the other major ad networks.
Suppose that Chrome just tried to replace the malicious embedded content. What happens when that embedded content is styled with CSS properties to make it hidden from the user?
I don't see a technical necessity to block a whole top-level page when the security model of a browser consists of many different origins.
If a page has included known exploits, it might also include unknown exploits.