Sean,
Yes, it sounds like the evil bit. Why would anyone bother to set it?
Two reasons
1) By standardizing the process, it removes the excuse for using various hacks and duct tape.
2) Because the villian in Bond movies don't view themselves as evil. Google is happy to pre-check the box to install their Toolbar, OpenDNS is proud they redirect phishing sites with DNS lookups, Earthlink says it improves the customer experience, and so on.
Forgive my skepticism, but what I would envision happening is resolver stacks adding a switch that would be on by default, and would translate the response back to NXDOMAIN. At that point we would be right back where we started, only after a lengthy debate, an RFC, a bunch of code, numerous bugs, and a bunch of "I told you sos". Or put another way: what is a client resolver supposed to do in the face of this bit? Eliot