I think that there is a pretty simple solution to all of this: pax, children and their parents aside.

1) The gov't stays out of the way as to what airlines are allowed to show, as the MPAA rating system already exists and that's a pretty good standard to go by.

2) Airlines do not show X, NC17, or (unedited) R rated movies on commercial flights.

In the end, IFE is not the main business of the airlines. Your purchased ticket gives you as much a say as that purchased ticket for the 6 year old across the aisle. If the parents demand G, and you demand R, why not do what's lacking in our society these days and compromise. PG13 or below seems completely reasonable to me. Basically, if it's allowed to be shown on network television, it's safe for a commercial flight.

I honestly don't see where the discussion needs to go from there.

Although, a new thread could be started to discuss the notion of what to do about PVD's and content.