I'd be suprised if the administration was really trying to shut down the industry - Not for any quaint reasons about morality or the first amendment (since when did Bush care about them?) but simply because it's a big industry that makes money - Porn is probably a bigger export than cluster munitions, and there's no obvious move to shut down the ordinance firms because kids get their legs blown off.
And it's nice to see steps being taken to reduce the exploitation of minors and immigrants (which, no matter how rose-tinted your glasses are, you have to admit is both endemic and immoral).
Having said that, I'd agree that the adressing and labling issue is going to cause all sorts of problems, as will the burden on second-tier distributors. I would have thought a central, federally-operated registry of all parties (funded pro-forma by the industry) would have been easier, cheaper and more secure: all you'd need on the material itself would be a file reference.
But then, when did common sense have anything to do with government?