KE also fails to differentiate between cashing out and giving Hive away. I do that a lot, almost every day. That increases my score. Donations to other Hive users shows the opposite of what the KE score is trying to capture, financial self interest, that KE uses selling Hive for cash as a proxy for. This is a weakness in KE, although one that would be insuperably difficult to account properly. It would be impossible to determine whether Hive or HBD sent to another user was payment for something received off chain, as you surely are aware.
Rep is really a personal matter. As you point out, some of the worst people get the highest rep (just like in real life), and that's because institutions are inhuman and can't represent human values. How you regarded someone might be meaningful to me, but how Trending regards someone is not valued by me (it might even reduce my regard for them), and that's what the current reputation metric reports.