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I've just tried the trial version of BusyCal in conjunction with OF "iCal Preferences" (not WebDAV). This does what I want except that (and Brian and whpalmer4 warned) repeating OF actions are not translated into repeating iCal events.

One viewpoint would be to say that apple should fix iCal to display todos in the calendar the way that BusyCal does. But if they did then busycal would be out of business. And if apple improves the todo functionality in iCal too much then OmniFocus would be redundant.
So while I can see that some of the integration problems I'm having are "apples fault" it seems that Omni's whole existence is based on providing improvements on what apple offers. (I was an OmniWeb user back in the day for exactly this reason) So it is Omni's job to find work-arounds for problems in the apple apps they integrate with.