I was an RF engineer for the cable company here in Vegas for 10 years. I can not only tell you that the data is NOT flawed, but it is far more specific and accurate than you could ever imagine. So much so, that Nielsen will probably be put out of business soon.
DVRs are INCREDIBLE machines for data collecting purposes. They report back to the cable/satellite company EVERYTHING. They report all season pass/favorites you have set to record, before you ever record them. Basically as soon as you select a program to record, that data is collected and processed. They report back the time it spent on your DVR before you watched it. It reports the average amount of time spent fast forwarding, rewinding and paused. It also reports, in REAL TIME, all "live" TV viewing statistics, what channels you watch, how often you change channels, if you rewound any part, etc. It will tell how much time you spent looking at the on-screen guide and which programs you hit more info on, and if you subsequently viewed the program. This is the REAL reason Cable companies tell you to turn your box off when you are not watching TV, it skews their statistics.
Lastly, DVRs will change everything in a few years, once everybody has them. The fastest growing segment in the TV viewing audience is the "Live Commercial Avoidance" segment. These are people who will watch a show (the most popular is American Idol), set their DVRs to record it, then come in about 20 minutes into the show, watch it from the beginning, fast forwarding through all the commercial segments, and arriving at the end of the show about the same time it ends in real time. The second fastest growing segment is the same day urgent viewer. These are people who record a show, but watch it within 2 hours, again specifically for the purpose of commercial avoidance. As these trends continue to increase, and they increase exponentially every year as people adopt and become familiar with the technology, advertisers are going to have to adapt. We may even get to a point where there will be no commercials because of DVRs, every show will be sponsored with a logo on the screen, or there will be ridiculous amounts of product placement. Again, American Idol leads the way in this department, with a Coke and Ford segment of every show.