The refs really need to be instructed to just "let em play."
Here's why:
1. First of all, as has been pointed out, fans don't like game stoppages. It makes it boring for fans and kills the energy of the crowd watching the game.
2. Let's say refs make a mistake on 10% of all calls they make. If they make 100 calls a game, hypothetically, then they will make 10 incorrect calls. However, if you let the players play and only call 10 calls a game, they would be expected to only make a single mistake and they would therefore have a much smaller negative effect on the game.
3. I would also suggest by "letting them play" refs would reduce the percentage of incorrect calls that they make. If you're calling every ticky tack foul, you're relying on your eyes to perceive minuscule events happening at high speeds and attempting to determine their impact. Now, if you ignored those types of ticky tack fouls and instead focused on the obvious ones, you would be much less likely to get things wrong since you'll only blow the whistle when the violation is obvious.
4. Lastly, flopping would be hugely discouraged by letting the players play. The reason is this: flopping creates the optical illusion that a ticky tack foul was committed. It works for ticky tack fouls because, if a hard foul was committed, 1) there is no reason to flop 2) it's impossible to fake genuinely hard contact, like Barea getting leveled by Bynum. So if you ignore ticky tack fouls, you ignore flopping. If flopping becomes ineffective, people will stop doing it.