Obviously the registrars can set up CAPTCHAs since they can use any interface they choose with their customers. But since it’s the registrars who are typically doing the “tasting”, that’s kind of pointless, isn’t it.

The real source of these problems is that the DNS business is almost entirely dictated by the registrars and not the registries, let alone the registrants. The whole concept of grace periods is because these registrars wanted to legislate themselves some freebies. Either that or they (rightly) don’t trust their own software not to go insane and run their accounts empty with erroneous registrations.

As far as making too much money, consider that only $4/year of the wholesale cost of a domain goes to the registry services provider (at least in the case of the .ORG registry, as can be seen from the contract). This $4 needs to cover the cost of the servers which run the registries, the data-centers in which they’re hosted, backups, and accounting systems. All the software has to be custom developed, and debugged. A name which is deleted after just under 5 days costs the registrar nothing, but places the same load on the registry systems as a name which is kept for an entire year, all compressed into a 5 days span of the time. This while providing no income to the registry. The costs are quite high. And that’s just the registry, there’s also the whole DNS provisioning side of the business.