Excellent story so far! I'm enjoying your Harry very much, and I can only imagine the chaos he'll create later on. So far, I think your story title is spot on! :D
You threw me a little at the end of this last chapter though, with the hints that Harry actually followed Hagrid into the forest, instead of turning around and going straight to Professor Sprout with a complaint against McGonagall, Filch, and possibly Hagrid, for being completely insane. I have a feeling that whatever you've got planned will still be entertaining though, so I'm looking forward to your next chapter.
As far as the Prophet goes, I think you have to keep in mind the nature of the Wizarding World's government, and also what happened during OotP. The Ministry of Magic is basically an oligarchy, and I think you'd have to look fairly hard to find a more totalitarian one. The reason why I mentioned OotP, is that it shows very clearly that the Prophet is really nothing more than a government propaganda tool, which means that nothing about it would really surprise me much, especially not misuse of power, and a complete disregard for anyone's individual rights. It also seems that the Wizarding World is more or less conditioned into believing everything they're told, especially rumors that are completely unrealistic and out there, so that would explain why no one has really bothered to do anything about it. Unless someone becomes a target themselves, they see nothing wrong, and if someone does become a target, they're not among the tiny group of people in power who could do something about it (since those people are the ones who have the Prophet in their pocket), so the status quo endures.
So yeah, while it really pisses me off too (I've done some copy-editing in the past, myself), it's really not all that surprising that it's a POS rag, and nothing like a real newspaper.