Sure it is a little extreme, but how fast would phone thefts drop if a handfull of peoples heads explode when they steal a phone?
Probably about the same as murder rate drops in death-penalty states. Which is to say, not much.
In my experience, one never stops creating bugs, they just get more subtle and harder to find. Nothing personal against you of course, but the statement above calls to mind the study that demonstrated how the less a person knew about a particular topic, the higher his level of confidence about his competence in that topic.
There is no real reason why Google can't do all of these things.
Well actually there is one: as a public company, they are expected to maximize profits. Even with the myriad of interesting projects and products, 99% of Google's revenue and profit comes from search-based advertisements. At the end of the day, that's where they'll circle the wagons. Everything else is, well, everything else.