Well, your feelings seem pretty articulate to me and I couldn't agree more.
I guess the direction of my thoughts are better described by Newsweek columnist Jon Alter, "My problem with all of this is less ethical than practical." http://msnbc.msn.com/id/10313724/site/newsweek/
The practices of placing material/propoganda (whatever you want to call it) is what it is. It's not new, it's not even sneaky.
And, where's the judgement about the "buyer" of the propoganda? Given what I know of the media, I find it hard to believe that anyone was "fooled" into placing anything.
And as for our reputation? I think the damage is done and only getting worse. I have a lot of family and friends (my husband is Dutch and my brothers live in Colombia and Saudi Arabia as expats) and it ain't good. If you ask them what the dialogue is like about the US, their common response is "we try not to talk about it."
I'm proud to be an American, but it does make me sad...