Don't you think you're more combat effective with 280 rounds of 5.56 as opposed to 100-120 rounds of 7.62? I shure do, and so did the people that implemented the M16 system.
Fact: With in fragmentation range, the 5.56mm bullet causes MORE extensive tissue damage than the 7.62 / .308.
FACT: That's a function of bullet design and not an inheriant characteristic of a cartridge or weapons flatform. I love it when people say the 5.56 is more effective than the 7.62mm and the 5.45 is a deathray compared to the "obsolete" 7.62x39 when the only explanation for their effectiveness is that their lack of effectiveness with traditional ammunition forced the design and creation of more fragible ammunition. If you apply this same technology to the 7.62mms they instantly become much more formiddible than any of the .22 caliber centerfires. In fact, I understand the the West German 7.62x51 was actually designed like and performs similar to the M193 ball ammo of the 5.56, only with larger and more dramatic wounds and the Chinese developed an ammunition for the 7.62x39 using a similar concept from the 5.45x39 except with low density plastic beads in the nose. Mr. Kalishnikov himself is quoted as saying he was adamently opposed to the 5.45mm abortion that they turned his rifle into, though he was all for modernizing the 7.62x39.
One disadvantage of the 5.56 and 5.45 is that they run contradictory to their stated mission. They were supposedly developed for lightweight, handy rifles suitable to combine SMG-automatic fire with an effective engagement range of about 300 yards. However, being only .22 caliber, they are heavily dependent on velocity over bullet mass or diameter for their effectiveness, and this virtually requires a longer barrel. You can only do so much with bullet design and our current technology. So you can put a longer barrel on it to get more velocity, but you lose the handiness of the rifle. The only thing you have left seperating it from a battle rifle is automatic fire and less power. Stunt the former with a 3-shot burst mechanism and you mine as well go with the latter and simply adopt a battle rifle. In other words, if you're going to deal with a 20-inched barreled rifle that lacks the capability of automatic fire as originally stated for the intent behind the conception of the assault rifle, you would be better off going with a 20-inch barreled 7.62mm.
Now, that doesn't mean I want to see us go back to the 7.62mm either. I would maybe retain it for LMG use but that is about it. But I am really not to entused about the 5.56mm, having used it on animals larger than I should have and seen the results. Multiple studies have been conducted into the matter over the past 60 years or so and all have concluded pretty much the same thing--about the ideal caliber for combined external and terminal ballistics with attention paid to recoil and ammunition weight is around 7mm. That is why we saw the original Garands in .276 Peaderson, why the British developed their Enfield (M43?) bullpup around a 7mm cartridge and pushed for its standardization by NATO, and why the 6.8 SPC was developed at .277 caliber. I feel eventually the theory of probability states that the politicians will get something right and zero in on a happy medium in the matter by adopting something with more "oomph" than the 5.56 and less ammunition weight and recoil than the 7.62mm. Hell, you'd think eventually they'd do it just by accident.
As for the M16, I don't know how much experience you consider legitimate, but my brother hates the f-ing thing. He's only in AIT right now and despises it. Maybe he was just spoiled by his $300 Romananian AK-clone but his letters home indicate that he is not happy with his issued M16. In fact, he recently steered me away from the Bushmaster Varminter I was considering in favor of "anything but an AR." With all due respect to you fine people out there, I actually know my brother. He is mechanically minded, anal about weapon maintence, and has been around firearms his entire life. I value his opinion. If he tells me that not only has there got to be something better than the M16, but that nearly anything would be better, I am inclined to believe him. So even if it looks like something off of HALO, I bet he'd be willing to give the XM-8 a try.