
Eric at The POW Block says: "I have noticed ever since around 2006-2007, when I got my first Xbox 360, that game demos have most always been the best 10 minutes a game can offer. After that the game can either fail or turn out good. Ever since I purchased Gamefly I have always been inclined to try the demo for the game I was about to receive. The reason is because I wanted to know if the demo portrayed the game correctly. In most cases it did not."

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There are people defending paying 20 bucks individually for 20+ year old games running through emulation. Peak ridiculousness.
I think that demos are at the height of their prevalence. Bioshock, Burnout Paradise, Bulletstorm, Dead Space 2, the list goes on and on. There have been so many fantastic demos that I don't really understand what you want.
For the most part, demos are a vertical slice. They show us the best aspects of the game. Sure they may mislead with this, but the point of them is to get you to buy the game, not show you that you shouldn't.
Also, 3/16ths wouldn't work. They're not going to give you 3/16ths of 40-80 hour game. Personally, I don't want a demo that's over an hour long. 15-30 minutes gives me a taste and that's all I want from a demo.
Why would you think that devlopers would show you that the rest of their game isn't good? It has nothing to do with responsibility, it's all business. This isn't the video games institute, it's the video game industry. Industry? You know, business? Commerce? Maybe you should take responsibility and wait until reviews come out to determine whether or not to buy a game if you're worried about this.
I think it is quite clear, having a demo be 3/16th long would force the games to become better. There is no reason I should play a demo think the game is good and have the whole game suck. Take fracture, the demo was good. The game sucked.
Also, why shouldn't your saved game from the demo carry over to the full game. This is a missed opportunity that most games don't do. Look at Dead Rising 2. Their "Demo" was amazing. It showcased the best parts of the game and allowed you to play for more than 10 min. Not only that but it was also a full game in it self. Then if you only wanted the free demo you could have about 3/16th of the "demo's" demo. It was a great idea that more developers should carry over.
I don't know if I would want to play a demo that long.
After thinking about this, I believe I would love if most demos allowed 1 hour of game play. For example, if I recall correctly, The Legend of Zelda: The Wind Waker demo started you at the beginning of the game and gave a limited amount of time to play. Others set a particular point in the story where it would end, like Shadow of the Colossus.
These are the types of demos I enjoy the most. With them, I know exactly how the game starts and if they give you an hour of play time you should know what you're getting into. Plus, if the story is anything worth paying attention to players will be hooked because they started from the beginning.
Now, if only they allowed you to continue a save file from a demo if you purchase the game...