I'm going to go into "salmon" mode a bit here, and do some swimming upstream and against the tide. I've never been one to duck a head-butt with popular opinion.
Here are my thoughts on "government" in SL. I apologize in advance for its lack of brevity, but these thoughts don't map too well onto a 10-second soundbite for the evening news.
In real world western democracies, there is this fundamental concept that government can only legitimately derive its power with the consent of the governed. "Consent of the governed"... that sounds like a pretty kewl concept to me! But how can we apply this concept to Second Life?
To me, in this digital metaverse, we all have the ability to "opt in" into whatever sort of "Consensual" agreements we want to, and avoid those that don't appeal to us.
Forum veterns may recall that, a while back, I had much fun publicly ridiculing and mocking the N-berg experiment, and scoffing at this government that Ulrika and Kendra were working on because I thought it looked and smelled a bit like a two person "Duocracy" than anything else. I even went so far as to form the "Costume Party" and create my favorite alt, BozoCon Queso, so that he could run for Bergermeister.
Well... I still think that N-berg has government structures that seem to me to be stifling and controlling and that concentrate too much power in the hands of too few.
But guess what... It doesn't matter! I simply chose not to "opt in" with the N-berg social contract between government and governed. I didn't give my consent to be governed. Its as simple as that!
And in the meantime, N-berg continues to grow and flourish (OK... "chug along with some floundering along the way" might be a more appropriate description but I do wish them well), and I continue to be governed by the benevolent dictatorship that we all know and love.... "The Lindens".
But let's suppose more of these government experiments come along with different structures and rules and expectations of both government and governed. With each, any SL resident can either consent or not consent to be governed. With each, its a consensual social contract between all that are involved.
To illustrate, I'll create an extreme example... Instead of the "City of Neaultenberg", suppose that some of us want to create "The Savage Nomad Lands of the Wild Prarie Tribesmen". Maybe this government has some land and creates some governing structure like "The High Council of the Perpetually High", and there are rules about how big your teepee must be and a law that states "All same-sex AV rituals must be performed in the Grand Log Cabin in the Sky".
I don't care... But whatever it is, its a government that has some "land" associated with it, and structures and rules. And everyone in the SL metaverse has the option to be governed or not to be governed. Its as simple as that.
Is it government? Sure it is. It may look like some crazy social club and not like the things that reside in Washington and London and Paris. But its government in SL.
Now... Let's take my example a little further. Suppose that a whole slew of these governments grow and take root in SL. For every government that grows and takes root, there would probably be dozens that just rot in the ground as withered seedlings. But some would work for some folks, and some would work for others.
Furthermore, in this growth we'll suppose "The Savage Nomad Lands" becomes a government that people actually find more attractive to be governed under than to by under the benevolent "Lindens" anymore.
Why not? Its digital social Darwinism at its best!
The Savage Nomad Lands may have zoning that allows people to shape their surroundings in a more community spirited fashion.
The Savage Nomad Lands may have rules for conduct and behavior that people find attractive.
The Savage Nomad Lands may have processes for judicial review that pale in comparison to the arbitrary "Linden" bannings that everyone says fall from the sky for no apparent reason.
The Savage Nomad Lands may be SO attractive that people are clamoring to be governed by them.
So... to segueway to a conclusion.
I think that to arbitrarily dismiss the notion of "government in SL" comes from this idea that somehow government is to be feared as something that will be imposed.
If we think of government as a social contract between government and governed, and one that can ONLY happen with the consent of the governed, then the possibilities are pretty exciting.
My $0.02...
- Ace
P.S. Ulrika... I still carry my Neaultenberg citizenship card proudly in Groups list. I had to work so hard to wrestle it from you, I hesitate to give it back!

P.P.S. ... and congratulaions on motherhood.