The problem (if anybody cares about this enough to be a problem) is that losses don't appear to weigh heavily enough. That's why you have a four loss team healthily ahead of a two loss team. One wonders what Hollinger's ratings would look like if, say, a team lost three games by one point and won a fourth by 63. Would they be the #1 team because they have a +15 point differential? Probably.
It's a flawed system, which would be fine, if Hollinger wasn't using it to predict the teams likelihood of winning 70 games or advancing in the playoffs.
Sure, I don't entirely disagree with your points, but what are the chances of that particular occurrence happening? And the formula doesn't have any kind of validity for such small sized samples.
Hollinger's ratings are based on plenty of empirical evidence that shows that scoring margin, adjusted with a few weights, is a better predictor of future success than the W/L record. Surely they don't have full predictive power - there are teams that can go unlucky and lose a historically bizarre amount of close games, for example; and there's lots of noise: injuries or teams running up the score, for example; but Hollinger reckons that (unlike many others sports staticians, Hollinger is relatively humble - albeit only relatively - about the explanatory power of stats). There are always statistical oddities, and in this case they are very prone to happen.
Personally, I don't even look at power rankings, including Hollinger's, but I don't see the problem with it. I think his power ranking formula is way more solid than many other of his linear weight formulas, like PER.
People should try to see them as what they are and understand what's Hollinger is exactly trying to measure. If they don't have any interest in what he's measuring - I do, but I don't check it because I already have an idea on how are the teams doing - just don't read them. Hollinger's method is flawed (I don't even like to call it Hollinger's method, because he didn't discover it at all), but it's the
best objective method of predicting success, at least for now. "Best" and "objective" being key words.
Hollinger is predicting the likelihood of play-offs success because this is the best metric to do it; but it's only the likelihood. The same way I can predict the likelihood of not raining at the next June 7th as large, although sometimes it rains in June.
If you want a ranking that weights the W/L record, check Sagarin's ranking.