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However, I'm convinced mathematically the current system will stabilize the 'true' scores quicker, since a +500 rating will actually come ahead most of the time (19/20 races as a guess), so all the little tiny rating additions balance out against the rare loss with a larger rating reduction. My 'proof' is that highly skilled players averaging say, 2000 never seem to go below 1500-1600 (apart from due to the 2147 bug).
Nevertheless, I agree the ratings can fluctuate quite dramatically, which is good in one way (since we play differently according to how tired we are etc.), but if we had (in addition) a longer running average where all ratings went up/down more slowly, we'd both be happy, and it would address your concern without sacrificing mathematical elegance.