Rule changes for soccer, part 3: penalty kicks and the penalty area

So, now that the advantage rule is history, we delve into the more controversial realm. I decided that instead of going in order of ease of correction I'd just wait until I see things in real games that really tick me off and write about them in the order that they arrive. [Spoiler alert for the Liverpool-Arsenal game] The next problem is the size of the penalty area and the awarding of penalties.

A penalty kick is awarded to an attacking team any time a defending team commits any foul in its own penalty area. This rule is supposed to make teams defend much more carefully inside their own penalty areas, because they don't want to give away silly fouls that will lead to goals. Unfortunately, it too often has the opposite effect, because referees are often wary of awarding penalties for minor fouls when there is no goal-scoring opportunity. Referees are also forced to award penalties in situations where the laws call for one, but in truth the attacking team wasn't anywhere near scoring.

In the Liverpool-Arsenal match Sunday Steven Gerrard was tripped quite clearly by William Gallas (third minute of video), but no penalty was called. It was an obvious, blatant foul (and I'm an Arsenal supporter), but the reason the referee didn't point to the spot is because Gerrard had lost control of the ball, as Thomas Vermaelen, Arsenal's other center-half points out here. The referee only has two choices, and both seem unjust: award a penalty for a clear foul on a play where the attacking player had already lost control of the ball, gift Liverpool an undeserved goal in a game where goals are few and far between. Howard Webb chose the second in this case (though I'm sure he wouldn't admit such a calculation).

Anywhere else on the field there's no assumption that you can trip someone who's trying to run past you--that only ever applies in the penalty area. In this case, the call was actually horrendous, but it's common for referees to have a higher threshold for fouling inside the penalty area (see the jostling in corner kicks and free kicks and the obvious advantage given to the defending team), and that encourages exactly the kind of defending that penalties are supposed to discourage.

Nevertheless, in a game with so few goals, is it right to give one team a free one for a mistimed tackle or an unintentional handball [at least as that rule is currently interpreted] when there was no chance of a goal from the run of play?

I can imagine two solutions. One is to allow referees the judgment to call penalties only for clear-goalscoring opportunties, and award normal free kicks from some specified distance for other fouls in the penalty area. Too subjective? Not necessarily. Referees already have to make the "goal-scoring opportunity" judgment in sending-off players.

The other is to halve the size of the penalty area (or something like that), making it 12*32 instead of 18*44 yards. [credit to Eli for this idea, but I have to say I like the former better.] Thoughts?