TMW -
I'm hardly an expert on any of this, but here's my take:
You have made the argument that the M14 is better than the M16 partly because it has more firepower, and it has the ability to go to full automatic if lots of bullets are needed fast. You also have argued that the gun is controllable in full auto and even went so far as to say "Soldiers will almost always use full auto when presented with the option. Unless they are in a situation where ammunition conservation is necessary.".
My rebuttals to those points. Yes, the M14 has more firepower than the M16. But firepower is hardly all that matters. In modern warfare, there isn't a big line of enemies to shoot at where you can just aim downfield and probably hit one no matter what. The single shot style of the M14 lends itself to sharpshooting, NOT normal combat. In normal combat, often the goal is not always to necessarily hit the enemy, but to lay down covering fire so that other elements of your unit can maneuver around to flank. The M16, with its burst firing is clearly better at covering fire than the M14.
"But the M14 has full auto capacity and would be great at covering fire!" I hear you say. Yes, you're right. It DOES have full auto capacity. It also has a mere 20 round clip. Using full auto, that clip would be gone in a couple of heartbeats, requiring our soldier to load up and waste much more ammo in order to suppress the enemy than if he were laying down covering fire with the burst fire and larger clip of the M16. After all, our soldiers can only carry so much ammo into battle with them. IIRC from my marksmanship and leadership course in college (taught by an Army Reserve Captain), the average soldier carries around 10 -15 clips with him into battle. For the M14, thats about 200 - 300 rounds, for the M16, about 300 450 rounds.
Finally, about your point that soldiers will go full auto if given the opportunity. I'm going to go out on a limb and say you're dead wrong on that. When we were taught about training by the Army Reserve Captain in college, he told us that soldiers are taught to shoot in single shot and burst mode. Full auto is FAR too inaccurate and wasteful on ammunition to be used. Think about it, if I have approximately 300 shots (15 clips of M14 ammo), and I get into a firefight, why would I waste 20 shots at a time going full auto? I'd be out of ammo in 20 minutes or less, and many firefights last much longer than that. Not to mention that I have to have ammo for later on in the day if necessary too. After lowering my ammo count, I'd be forced to fight in single shot mode which basically makes me a sniper without a sniper rifle. Hell, even the infantryman using the M249 in the squad doesn't really go "full auto" usually. They fire in approximately 10 round bursts with at least 2 to 3 seconds between bursts so that they can actually have time to aim the weapon and don't waste too much ammo (once again, coming from the Army Reserve Captain on that info).
One also needs to consider how much power you really need out of your weapon. Most enemies we fight today are unarmored. Unlike our troops, they have no body armor or helmets to protect themselves from our weapons. A quick burst from an M16 will take them down just as easily as a shot from the M14, but there will be 3 bullets spread out slightly instead of 1, giving a greater % chance of at least one of them hitting the target and incapacitating them. If the situation came up where our troops were up against body armor, they could easily call in support for more powerful weaponry, but the fact remains that in most combat situations, our troops don't NEED the higher power weaponry.
Last but not least, there's this. From the wikipedia page for the M14 (I know, not the most reliable, but good enough for this), the M14 was designed to take the place of the M1 Garand, the M1 Carbine, the M3 "Grease Gun" and the M1918 Browning Automatic Rifle (BAR). However, "It proved to be an impossible task to replace all four, and the weapon was even deemed "completely inferior" to the World War II M1 Garand in a September 1962 report by the comptroller of the Department of Defense.". At this point, the M16 was developed and the Army ran a series of tests resulting in the cancellation of the M14. Look man, the Army ran a frickin series of tests and decided the M14 wasn't good enough! The guys who know WAY more than us ran a test to decide exactly what you're asking and decided that YOU'RE WRONG! How much more can you ask for? The M14 still enjoys a role as a sharpshooter weapon, and in that employment, I will agree with you 100% that it is superior to the M16. However, as stated above, there are numerous reasons the M16 is superior to the M14 for basic combat infantry duty.
And really, do you honestly think the U.S. would equip its soldiers with inferior weaponry for over 40 years? Our country has a hardon for making sure our troops have the best shit out of anyone in the world, so why would we knowingly handicap our troops for 40+ years?