Auto-reset once a month... very interesting idea.
It'd make a mess of peoples' testnet wallets-- they'd be full of orphaned 0-confirmation transactions. But deleting your testnet wallet once a month wouldn't be that big a burden, and that should prevent people from trading testnet coins as if they were worth something.
Somebody who wanted to be annoying could still drive up difficulty after every reset and make life miserable for anybody testing their new exchange or merchant software, though.
The problem with just doing more frequent difficulty adjustments is somebody with lots of hashing power can still over-write huge parts of the chain whenever they like. I suppose you could argue that bitcoin services should be written so that they can handle suddenly getting a 600-block-long chain-reorg... but that just does NOT happen on the real bitcoin network.
More hare-brained thoughts: could automatic block-chain lock-ins for the testnet be implemented somehow? Fetch a block depth/hash pair from a website somebody volunteers to create (auto-updated once a day...) ?