This is about greed. We've come down to a fairly classic argument. The rhetorical force of your argument hinges on a strong desire to protect our children, which makes it very powerful. But we have to resist the urge to protect our children by doing away with their rights to participate in media. In fact, I think people would prefer them.
Some evidence suggests that people are offended by some of the gore.
Yet the violence in media provides images and messages that are not being expressed elsewhere in the culture. I think we need a deeper study of the content of media, and the social context in which it's used, to understand violence's appeal. It seems to me that kids are drawn toward images of power. The gaming industry currently defines power in terms of violence. Now, we need to allow new forms of interaction and storytelling to take hold and define power in less offensive ways.