The concept fails on every level.
1: The whole point is to prove that God can successfully rule humans. By having us rule ourselves that proves absolutely nothing about gods abilities.
2: The challenge was made while humans where perfect, while disease didn't exist, while the ground was not cursed, and while animals where not carnivorous. But God changed all that... God cheated! That's like me telling my parents that I am able to take care of myself, and they say: "Wanna bet?" and I say: "Sure"... Then they break my legs and throw me in a 50ft deep snake infested pit! The challenge is void.
3: The humans actually DID manage to take care of themselves DESPITE god rigging the challenge... thus the Tower of Babel... they were succeeding! Then god cheated again. (Genesis 11:6) . . .Look! They are one people and there is one language for them all, and this is what they start to do. Why, now there is nothing that they may have in mind to do that will be unattainable for them. . .
4: The few times that God actually did show off his leadership skills, he failed miserably. He screwed up in eden, he screwed up Israel, and even a third of his angels would rather DIE than continue under his rule.
Not even HE could rule humans in the state he put them in. Israel rejected him over and over again, saying they were better off in Egypt... God eventually had to elect a HUMAN ruler for Israel! (And that went pretty well, untill he started interfering again. ironic)
God accepted the challenge, cheated, started to lose, then cheated again, and failed anyway. And we're supposed to believe he'll actually get it right in the new system?
If Satan existed I'd be thanking him for being the ONLY one to defend the human race. (Did you ever stop to wonder what Satan wanted out of the situation? Unless he really thought that god was a bad ruler and wanted to help us, there was no reason for him to do what he did. He made the ultimate sacrifice on OUR behalf.)
Here's how the challenge SHOULD have been carried out: Leave everyone perfect! Split the planet up into two sections, the people who obey god, and the people that don't. You gain nothing by obeying god, except a better leader. That was the challenge right? That nobody would serve god unless they had something to gain... like everlasting life.
If the majority of perfect people decided to serve god simply because he's a good ruler or out of gratitude, then god wins. Simple as that.
(Although I doubt ANYONE would choose to eat one type of food forever, wander around in a desert, sacrifice an animal every week, not have sex, etc. Unless they had the carrot of everlasting life along with it.)