The bad guys did not have a clear advantage. 7.62 Warsaw has poor ballistics and AKs are not particularly accurate at long range. If someone's ever seen one place at a highpower match, let me know. 7.62 Nato, on the other hand, has excellent ballistics. But you point out what should be a well known truism by now: you can't have one caliber or weapon do everything well. With the correct ammunition for the twist and the target type, the 5.56 has shown itself to be very effective in CQB and urban warfare distances (anyone who disbelieves the lethality of .223 on man-sized targets may wish to look at the fatalities rate of aimed 5.56 fire in the DC sniper shootings). On the flip side, the superiority of .308 is (one would hope) pretty universally acknowledged at longer "sniping" ranges.
The one-size-fits-all mentality may simplify logistics, but that's about it.
The new ammo often drills neat "knitting needle" wounds which may be lethal later, but are not manstoppers now.
The old 55 grain stuff was unstable and "tumbled" when strking an enemy, leaving awesome wound channels for much better instant stopping.
The ballistics on the 7.62 aren't all that poor and AK-47 is more reliable in harsh conditions than the M-16, especially in the fine dust of the middle east. A lot of AK-47's aren't made to close tolerances, which makes them less accurate, but less likely to jam when they're in a dusty environment. You're correct in the fact that no weapon is ideal for every type of mission. Given a choice I would take the SAW over both the AK and the M-16 for the type of combat they're doing in the gulf.