Flyfish,
Your points about why traditional group size isn't an ideal measurement are all on target. (Sorry 'bout that.
)
However, coming up with your own method for measuring groups is also problematic because no one else can compare their results to yours or vice versa.
The military has developed a few standards (CEP, R95, RMS, etc.) for measuring accuracy that answer your objections. Unfortunately, none of them are anywhere near as easy to use as a simple group size measurement.