Can you provide an example where
1) someone was suspected of scamming
2) they provided information to show they were legit
3) the negative feedback did not get removed and
4) the person that left the negative feedback is (still) in the Default Trust list?
Yes, I can.
1) I was never suspected of scamming.
2) My over 3 years of honestly trading here demonstrates I am legit. I was accused of "lying" on the basis of a topic which is under debate and neither party can prove the validity of the accusation. (additionally "lying" has never been an acceptable use of giving negatives from someone on the default trust.)
3) The negative feedback did not get removed.
4) The person who left the feedback is still on the default trust list.
https://bitcointalk.org/index.php?topic=915823.0;allNoted. The actual text in the feedback makes it clear that it does not relate to your trading history. The situation is not perfect. I recall that this feedback was updated and altered many times. Which kind of demonstrates it is self-moderated. I accept that you disagree with that feedback, but in the end it's their opinion of you. And their opinion is generally valued. Regardless of it being valid or not.
Expanding your trust list out to level 4 means that a lot of scammers will stay in your trust network which means that their alts will possible have positive trust. The scammers will also have the ability to make it easier to give people negative trust that probably shouldn't have negative trust (just look at how many people woodcollector and his alts have given negative trust to, and I think he is (or at least was) in level 3 or 4 default trust (which is the case with a lot of other scammers)
The idea is that others would notice this and exclude those scammers from their trust lists. If it works out as intended it might even help identify account groups (hey, this known scammer trust x, y and z... Let's have a closer look at them... Hey, it's a trust circle... and x,y and z are also scammy).
Of course I'm not sure how it would work out in reality and I didn't take the jump yet. I'm using a very limited trust list myself, and I think I might have more exclusions than inclusions...