Kharon,
I think the CASA subsuming ATSB would be a symptom of CASAs pathology.
The real issue is that CASA believes that it is the master and one true source of aviation saftey knowledge in the universe. All the problems the IOS (and certain Senators) have with CASA stem from this belief - CVD, Part61, PelAir, the general paternalistic condescension for the IOS, the contempt they hold when impertinent senators make inquiries.
Any report that questions this belief must be amended or hidden so there is no hint of a duck-up.
Until CASA sheds this belief we will not see an improvement in relations.
Concepts like SSP, SMS, Risk Management systems, and "outcome based" regulation are steps that make everyone (including us IOS) knowledgeable in matters of safety.