Honestly, it's irresponsible of MtGox to even offer the option of issuing a market order given the known horrible performance of their matching engine. At minimum, they should not allow market orders when lag is significant.
Agreed. Don't use Market Orders. And definitely don't make it the default option, which I think it might be.
People who don't understand how it works will think they will get the price they currently see on the screen with a market order, but when it lags and there is volatility, they can end up getting shafted by a lower price than they wanted to sell their bitcoins for once it goes through.