You're missing the point. This is the politicians saying that policing must happen, and if a social networking company isn't going to do it effectively then there will be consequences for them.
I know that even in New Zealand there's a general acceptance that policing is, unfortunately, necessary.
It's up to the website operators to comply with the law. So far they've been hiding behind the old "we're not the publisher" argument, to limit the set of laws they have to comply with. That might be a cast iron strategy in the US, but is looking increasingly untenable elsewhere.
Regarding your numbers, yes the challenge is large. However that in part is due to the fact that the amount of dodgy material that there users post is also quite large. It's because YouTube, Facebook and Twatter have no real idea who their users really are. Turns out that user anonymity is a bad idea. There's no real consequences for anyone posting dodgy material. Account locked? Just create another, for free. There's nothing to deter that % of society that wants to exploit the networks. It's really hard to go from an IP address to a user identity good enough to bring a prosecution, so currently it happens in only the most extreme cases.
If the social networks want to limit the scale of policing their content, they need their users to be more afraid of posting crap in the first place. That means having a solid i.d for users. That means a more restrictive sign up process involving something substantive like a verified credit card transaction and having all the mechanisms required to deal with credit card fraud. And they need to keep re-verifying i.d. Of course, they'd then have to be much more careful with what they do to exploit people's data...
Will it destroy social network websites? Who knows, and frankly, who cares?