I gotta say I agree with the AO rating the game received. Like any artistic undertaking (well, the parts of game development that are artistic/creative, like concept and graphic design (the main culprits here) I believe that there should only the most extreme application of complete bans. In my mind this would apply to games that say, put you in the role of Hitler, Stalin or Pol Pot, and set you to find, as your primary aim, the most efficient and quickest way to exterminate the relevant (in the case of these people) race/social class.
I gotta say though, and someone correct me if I'm wrong, a game like Manhunt, where the primary gameplay, if not plot aspect, is to butcher people and aspire to do it in the most gruesome possible way, is in my opinion, very close to that ban.
I mean (and this spreads across to the ol' parenting issue) even if a game is given the highest rating, it will still, somehow, find its way into the hands of young kids somewhere, and it's definately not suitable material. In a perfect world with a 100% reliable Adults Only rating there'd be no problem, but the possibility of children playing this is pretty dodgey to me.
And I would also think that Rockstar purposely pushed the limits with Manhunt to get publicity. That their plan worked too well is something they'll have to accept. Some might say 'justice'.