The OP's post is very slippery. It's written as if it's describing the situation from a neutral stance, but it's full of political games.
Let's start with the topic:
"Do we want to work with money regulators, or keep Bitcoin unregulated?"
This obviously not the choice. The regulators are going to regulate Bitcoin use whatever the foundation, or anyone else does. The question is whether we think the foundation should lobby money regulators to reduce unhelpful regulation.
Agreed. This "worrying about them getting regulation wrong" is ridiculous. Let's say the regulations are too broad - then they will be unenforceable. Or too narrow - then they won't be applicable. Let's say the regulations are draconian - that will immediately bring about hundreds of forks and drive everyone underground. Or they're lax - well then everybody just LOLZ. How about if regulations are technically unsound? Everyone just adjusts their behavior such that they skirt around the language. What is the definition of "bad regulation"? Well, if you're opposed to regulation then the terms are redundant, and if you're in favor of regulation, well, let's just say that everyone will have different criteria to make that determination...
Look people, you're worrying about your master making a cage that is uncomfortable for you - so you're going to tell him how far you'd like your bars apart?!
Have you ever heard of "rearranging the deck chairs on the Titanic"?
Also, stop with the blockchain limitation FUD - that's a sidetrack issue that is not relevant to the real issue:
Are you going to man up or suck up?