Let me begin my admitting that I'm as ticked-off by S&H practices as you appear to be. But I understand it, to a degree...
The handling portion of S&H includes a transaction processing cost that is not a function of the value of the item or the distance it will travel. Factored into that are overhead costs that vary from one manufacturer/distributor to another, and depend on customer service philosophy, marketing strategy, manufacturing efficiencies, shareholder expectations, competitive environment, transaction volume, and other variables.
Where I work, we calculate actual shipping costs (what we pay to FedEx, DHL, which is primarily a function of distance and weight), then add $20 to that as handling. That doesn't cover all our order processing costs, but it offsets them enough to satisfy the bean counters. On some shipments we lose money, on others we may make a little bit, but in the end, the controller only cares about the net.
Other companies, typically high-volume catalog-type organizations, base it on order value because it's the easiest for the customer service people to calculate and quote.
In other words, S&H is made as complicated as possible to make it difficult for customers to substantiate any claims of unfairness