Get your objections into OFCOM and let's see if they listen:
http://www.ofcom.org.uk/consult/condocs/dtv/
My main objections are the removal of the channels from Freeview and the limitations of the service making it pointless. I also raise the question that if Sky want to tap into the "lite" pay-TV market, why don't they do it on their own platform.
As for alternatives, I think a "Sky by Wire" service via BT Vision (streaming the channels over broadband) or a Sky Anytime service - similar to Top Up TV using Sky Three's or Sky Sports News overnight space, but having to be a viable alternative to Sky so hence providing the decent Sky One and Sky Movies content - and selected Sky Sports content too (e.g. extended Premiership highlights)
P.S. And in a move which looks incredibly anti-competitive, they've blocked access to the
EPG for new channels now, saying older boxes can't cope:
http://www.digitalspy.co.uk/digitaltv/a77042/sky-to-refuse-new-epg-slot-applications.html
They've already caused several obstructions when channels such as More4, ITV3 and ITV4 launched - with Sky not getting them on the EPG in time for launch or in the case of More4, bundling it in with the Sky package despite giving C4 the impression it would be FTV.
It really does all boil down to the same classic thing - as content supplier and platform supplier Sky have a conflict of interests, and as such should be split into two clear independent companies.