I think that adding a tag for inline TeX expressions (like $...$) and reserving <math> for displayed expressions (like \[...\]) would be a good workaround for the known problems -- before we can use MathML.
In this way, the users would have a second, similar list of choices in their Math rendering Settings : one for each tag. By default, both would be set to « HTML if very simple », like now. But a user who has enough Unicode might want to set « HTML if possible » for inline TeX, and « Always PNG » for displayed TeX. « HTML if possible » still needs improvements, but it's better than nothing. I'll enter a bug for this too.
And please don't tell me « keep your breath for BlahTeX ». We all know that MathML isn't currently usable. And when it'll be, the distinction between inline and displayed will be useful too.
I've had this idea in response to the frequent lamentations on the french Wiki about mathematical typography, and it satisfied everyone in the mathematics project. Should I create a poll to show you the support ?
A french developer told me that if a developer implemented this in a patch, we could apply it only in the french Wiki. Perhaps is it simpler and quickier to implement it in a patch than into Mediawiki.
Thanks for your interest !