I don't know what is the best solution, but the thread-starter is absolutely
correct that the current <ref> syntax horrible clutters up edit pages - it
must look a NIGHTMARE for anyone vaguely new trying to edit. We really must
think of a way to fix this.
To avoid breaking current pages, we'd have to introduce a new shorthand for
referencing, so that the old way still works. However, to do this we'd
effectively have to alter the parser, but then the <ref> tags are an
extension - and the parser can hardly define syntax that you can only use if
you have a particular extension. The reference extension would have to be
incorporated into the MediaWiki core and no longer be an extension, before
we can associate non-extension markup with it.
Which is actually a pretty good idea.