The flight crew can kick you off for any reason they want. If you refuse to get off you are breaking the rules. In your opinion, what should happen in that case? Obviously forcibly removing them is out. Telling them they will go to jail upon landing is out. What should be done? The inmates are running the asylum at this point.
Not quite. They aren't exempt from the laws any other business has to abide by. Try kicking a person off specifically because they're a woman or specifically because they're a minority. Probably doesn't matter what the TOS say, they're gonna lose that battle.
I get what you're saying but the fact that they can even claim to some all-encompassing right to remove someone from the plane is just ridiculous. What if their rules stated that situations involving overbooking would be settled by a game of rochambeau and if either party refused to kick then both passengers get tossed? Just because airlines can unilaterally make rules that the public is obligated to abide by regardless of how ridiculous doesn't mean airlines are in the "right". People shouldn't have their vacations and or travel plans subject to the airlines inability to hold up their end of the bargain.
As for what should happen, a good start would be to prevent these situations by not asking people to get off the plane for absolutely no reason. Start there and all that's left are people who should be forcibly removed.