It's already centralized around complete trust in developers. You can't know what any smart contract is going to do prior to running it because it's Turing complete. Bugs can be obfuscated and this could be the tip of the iceberg for what we might find in the future.

I also want to say that the bug we see here doesn't just apply to TheDAO. It's a general bug which will apply to many smart contracts which use the code base of TheDAO.

As far as the purpose of a blockchain goes, it only has a purpose if the community can use it as a central point of trust. If the community doesn't trust a particular chain then the community should always have the right to abandon the untrusted chain to move to the chain they trust. Ethereum is not a cryptocurrency if we remember right so it's all about the smart contracts and Ether only exists to support the smart contracts.

I don't think the community will trust Ethereum smart contracts ever again if trust is not restored. If it means going to a hard fork then that will be fine if it maintains the community but if the community is gone then Ethereum will have no users and no one will give money to smart contracts because no one will trust them enough or the developers.