Interesting points, and I agree that the artists of the songs included with games that use them should be paid some sort of royalty. I'm not sure how much would be appropriate though, given that the comments seem to indicate that games would be based on the music, rather than the music being part of the game (or an extra feature, whatever).
I think what music publishing companies have to realise is that video games are potentially a vastly lucrative market for their music. All sorts of artists have their music in games that aren't anything like Guitar Hero or Rock Band - Quake and Descent are two that immediately spring to mind (going back a bit there, but still) - and if they can find a way to remain in the market without annoying publishers or developers, it's money in the bank.
That said, there are a lot of independent game music artists that do equally good work - Sonic Mayhem for example - that license their work themselves. Combined with the usually acceptable music created by the development teams themselves, I think record labels need to be lenient in music contracts for games that aren't like GH or RB. It quite literally is free money for them, along with publicity for future works by the same artist.
edit: corrections etc.
This comment was edited on Aug 15, 09:47.