Very neutral, objective, and good analysis. I very agree with you. I do not detest China. Instead my views are pro-China(early forum days) to neutral to critical towards China(current). While I do carry some bias for sure, I attribute to China fairly for what it's done right and wrong, and I try hard to be a tough yet fair critic of China because I try to maintain a down to earth view of China.
Speaking of '97, one must understand Tiananmen Massacre was what destroyed China's image the most. If HK had a better view towards China beforehand, which is not so much, June 4th really destroyed anything that's left. Before June 4th, Cultural Revolutions also burned deep because many escaped to HK, so essentially the biggest divergence I reckon, would start from those times. My parents brought us to Vancouver in '94 cause of those fears. Although '97 happened without bloodshed, still there are new problems that are being (un)fairly attributed as being caused from China.
I also admit there's a huge mistrust within people from both straits. For honesty I can see China attempting to reconcile with HK, but we do just prefer to be left alone. It's not good, but definitely negative events in HK that's being associated with China will not help. If China really wants to work things out, I suggest leaving the problem. I very admit there's a strong element of HK superiority over China, and I do not agree with this, but this is a very common phenomenon in social psychology. Ingroups will attempt to see itself a superior, especially when they have legitimate grounds. Such phenomenon occurs everywhere, particularly cities where there's a bigger minority group or strong in immigration. Such xenophobia are common, and often the only way is to increase cooperation and working together and looking for similarities without dismissing diversity. This is because each group sees their own social identity as important, so trying to dismiss it(assimilation) will cause a backlash.
Finally, HK's biggest mistrust, as with Taiwan's biggest mistrusts, would be China's intentions. We/They always feared China will pull off "China political suppression" towards their societies, hence the mistrust. Article 23 and Nationalistic Education thus received such impressions as attempts. One is seen as attempt to suppress freedom of speech, while the other is seen as brainwash. Honestly, Beijing shouldn't have to ever worry HK going rogue..my best picture to paint this is HK is equivalent of the kid who's got his own room and his own world and his way of doing things and doesn't like all that jazz the the rest of the family is pulling off. However when sh!t happens he'll still be part of the family, and still identify self as Chinese. Let's consider the fundraising for Sichuan Earthquake and the support for Beijing Olympics. HK doesn't need to be taught how to love. One crucial aspect, I'd show you, is the examples of differences, and why these cause distastes. (Let's not forget these differences are also values):
Things I highlight are minor. Italicized will be more serious, with bold being the worst. What I place in the middle doesn't affect too much
HK-------------------------------------------------------------------------------China
Rule of law, World Ranking for Least Corruption #12, ICAC----------------Corruption
Traditional ----------------------------------------------------------------------Simplified
Freedom of Speech and Assembly----------------------------------------Censorship
Respect for intellectual property and ethic business practice------------------Quality issues and tainted milk powder
-------------------------------------------Orderly mannerisms
-------------------------------------------------HKD ---RMB
---------------------------------------------------Education
-------------------------------------------------Local Cultures
My point from this illustration isn't to say HK is better. These are some major differences we are associated with. I won't get into similarities because I can go on forever.
I'm not saying HK's behavior is right, but HK has its own identity, and that the most ultimate way for China and both sides to fix things is to recognize the differences and then learn how to soothe around the sensitive edges and find more common grounds. Working in from common grounds is the best way to start things. And China will have more to do.
And one area that China had done well in HK is the PLA garrison..which generally didn't disturb HK's civilian lifestyles. These things actually can help improve China's image in the long run. It's just that they need to reduce interference in local affairs even more, and pro-Beijing parties can sometimes be an issue if they are seen to be speaking for China.
If anything, China can attempt to garner more support from HK by supporting some of HK's decisions, including direct elections, heed HK people's complaints, and establish a more direct access of communication paths.