I think a digital currency is a lost opportunity, you could make the system self adjusting to a set target, very accurately.

It's a catch-22. While many people would agree that strict deflation is probably a bad idea, the very fact that this policy proves changeable by a popularity vote would set such an immensely worrisome precedent. It would mean that the inflation policy is in practice discretional.

That's what Bitcoin does. The protocol can't know if funds are destroyed... because they cant be. They are actually just sitting in unreachable wallets.

Right, though all wallets are reachable/stealable with sufficient compute power. This is partially why it's always a good idea to split up your holdings into many wallets.