First of all, we ourselves don't have a clear definition of what a setting is within Drupal. I'll take a rough guess, and say that settings are 'global' values (such as the site's name), and that a setting should only ever have one 'instance', or one 'set of values'. This is in contrast to non-settings, which are 'per-instance' values, and that have multiple instances, or values, which are tied to data entities within Drupal (such as the name of a menu item). Of course, stating this definition is much easier than actually applying it to the real-world Drupal, where there are many grey areas as to what constitutes a 'global' or 'per-instance' value.
Clearly, people have different opinions, experiences and expectations. There is no ideal solution so let's agree to stop arguing about it. The answers to all (y)our questions can be solved by a simple cardsort experiment. We have the categories (block titles), the top-level links and their descriptions. All we need to do is organize a cardsort experiment, invite all our users to take part, and we're done. :) -- Dries Buytaert :: http://buytaert.net/