1. It's a filter at an ISP level. The system they propose, I believe, can only be modified by the ISP's or governments themselves. I may be wrong on this, but the government may have proposed this idea with the idea that kids may be able to bypass the filter. Hence why they choose to implement a system at an ISP level, one which is inaccessible to kids. Giving families the power to choose at a user level may undermine the system.
2. Poor choice of words on my part. Apologies. What I meant to say is that if parents were the ones who chose the filter, I doubt they would worry what constitutes porn (eg. is softcore too explicit). However, if you were to aim this filter at the entire population, I can see this problem being a lot more frequent.