One wonders what might have happened if Edmund Burke had been prime minister in the 1770s; if he could have reconciled with the Americans it could have caused a lot of things to be different -- maybe no French revolution, maybe no Napoleon, and so forth. I think eventually America would have been independent -- the notion, for instance, that a British king could draw a "do not cross" line down the middle of the Appalachians and expect it to be obeyed is pretty silly. Eventually, I think, the U.S. would have become independent, but probably on terms that would have been better for Britain. It would be an interesting alternative history. One wonders whether slavery would have been abolished in the U.S. sooner, or whether the South would have rebelled from Britain, or whether Britain would have ignored the slave trade and left it in place, with all that southern cotton money pouring into Parliament.

And don't forget Churchill's musings about the possibility of America eventually becoming the new center of British power. Imagine if the allegiance had stayed intact and the Crown had shifted to, say, Boston.

I smell an alt-history book in here somewhere.....

It is interesting to speculate if the American Colonies had been granted representation in Parliment (to blunt the "taxation w/out respresentation" charge, but I think that would have been quite a stretch. Recall from the Declaration of Independance, the clause citing what the Colonists considered the unlawful extenison of Parliment's authority (through the Stamp Act?) - I think American independance was a foregone conclusion.

I think it was less ham handedness on the part of the king, and more ham handedness on the part of the Tories in Parliment; a more reasonable tax policy coupled with relaxed import/export regulations would have gone far to mitigate the colonists' economic arguments. The colonies would probably have become independent anyway, but still part of the Commonwealth and instead of one big country there'd be lots of smaller ones.

I envision an alt-history in which Robert E. Lee is fighting Major-general the Earl of Cardigan in the Peninsular Campaign (the Light Brigade charges to its death at Seven Pines), while the semi-independent duchy of New England, under its hereditary ruler, Duke Charles Francis Adams, considers whether to remain loyal to the crown or to run the blockade. What will Colonial Party Prime Minister Lincoln do? On either side, the Tories and Whigs are agitating for his downfall in Parliament; the 100 seats Lincoln's party holds(who has deftly used his party's crucial bloc of votes to position himself in the middle of British political system) were enough to get him appointed by Queen Victoria, who has never approved of the rough backwoodsman -- but will he be able to survive? And will General McClellan ever be able to put down the revolt in Ireland against the wily condotierre who goes by the name of William Tecumseh Sherman?

I would encourage you to read an interesting alt-history book called The Two Georges exploring the world in which the Crown came to an accommodation with the Revolutionaries.

Also, George the 3rd makes a delightful appearance in Susannah Clarke's wonderful Jonathan Strange and Mr. Norrell, a book I cannot praise enough.