As for the 1000' - it takes into account inaccurate flying by allowing a safety margin, all manner of altimeter errors, any likely obstructions and has the advantage of being a nice round figure to work to. Can't really see any reason to change it.
I would put forward that the 1,000 feet was mandated when navigation aids were far less accurate and so "navigational awareness" errors were far greater than in today's IFR equipped aircraft. And likely to be flown on RPS, rather than a local QNH.
It seems to me that this incident would have been prevented if a stable approach had been flown, with a timely go-around at a pre-planned MDA, rather than an attempt to press on into unsuitable conditions. Thankfully the crew learned the lesson without further penalty. I know they do read this forum and they are only too aware they obviously pushed things too far. We've all learned our limits... few professional pilots would come out of the wash totally whiter than white - even those now running the authority.
If aircraft are to be prohibited from ever descending below the arbitrary "safe 1,000 feet above and not one foot below", the manufacturers are totally wasting their time developing better and far more capable systems than we have been used to in our relatively archaic military helicopters. The technology is already out there; the "modern" military are years behind, mainly because of budgetary and procurement time limitations.