I'm also getting a "round peg/square hole" vibe. Google has been telling us for years that the folder metaphor is outdated and we should use search to stay organized. So when I set up desktop sync I ended up with a folder full of hundreds of unorganized documents. This isn't Google's fault (I kind of saw it coming) but it definitely supports your claim that Google Docs wasn't the right vehicle for desktop sync.

Also, what happens if I open an email attachment in Google Docs just so I can view it (I don't use MS Office)? It seems like that will instantly sync it to the top level of my GDrive folder on my computer, so I'll end up with a huge mess of files there. Same thing if I click a link to view a public Google Doc (I'm guessing).

There's a lot to like about GDrive, but forcing it into Google Docs makes it seem like a really messy and inelegant product.