Where do you start with continuity? In many ways it can be what's great about comics. A rich tradition of storytelling that deepens the characters and adds an extra layer of depth and 'reality' to the universe the characters share. On the other hand it's constantly something creator's need to research and keep an eye on (often interrupting their plans or requiring them to abandon a storyline) or something they ignore entirely which contradicts the rules of the universe readers have come to love and leads to fan outrage all over the web. There have been many attempts to deal with continuity problems in the past and more recently. 1984 saw the first crisis with DC rebooting their entire universe (this was followed by another one more recently, and then another and then another...) Marvel used the Scarlet Witch to clean up those messy mutants and the Clone Saga and Brand New Day to give Spider-man fans traumatic headaches and years of therapy seeking angst.
Did any of these methods work? It's really hard to say, but one thing remains today that was the reason for them in the first place; new readers say the years of back history and continuity puts them off reading these classic heroes and their books. Re-launches seem to be the key thing at DC but for every new start they introduce by bringing back Hal, Ollie and Barry Allen they turn their back on the 'new generation' of heroes they brought in to replace them. While Dan Didio may be enjoying himself resurrecting his Green Lantern, Green Arrow and Flash, there's an entire generation of these characters' fans (who've read their stories for a good 10 years or so) who are seeing their GL, GA, Flash being sidelined and ignored to appease an older fan-base who in all likelihood, if not now a minority, have stopped reading comics entirely.
So what's the solution to the continuity conundrum?
I'm not sure there is one. There are many fans who despise the reboots and follow continuity to the letter, never missing a hair out of place in both shared universes. There are the 'multiple realities' options but they too just seem to lead to more confusion amongst new readers trying to find their way into these stories. In my opinion the ideal thing to do would be to loosen the ties of continuity. I'm not suggesting that it should be abandoned entirely but I've noticed in my own reading habits over the past few years that I more or less consider a change in creative teams as a continuity reboot anyway. Which is also what I'd really like to see and have decided to call 'The Simpsons' approach. (Not because they invented it but because it's such a long running series and everyone knows it.)
I'd suggest that comics allow creators to determine their own continuity when coming on to a book (especially large team books like X-Men, the Justice League and Avengers). Each new creative team can be viewed as a new start (like the never ending Simpsons reboot and why Maggie never ages) so you don't have to have read 40 years of history and events to keep up with the story or feel like you've missed out on something. The universe contains certain 'universal truths' that we are all familiar with and expect which will in turn allow a creator if they want, to refer back to major events that happened in another creator's arc before them. So if they want to expand on a thread that has come before and develop it, why not let them pay homage to a great storyline that way? (After all some incidents in the Simpsons have become touchstone events that become a universal truth in every episode despite the usual 'reboot' effect. Maud is still dead, Homer was an astronaut once and Sideshow Bob has had multiple attempts at killing Bart).
So I'd like to see a more flexible approach to continuity. Less focus on 'you can't ignore that' or 'but he/she is dead' and more enjoying a story on its own merits, with certain stories or story-lines (like a large summer event for example) being touchstone events that are constantly true. So if a writer prefers Wally West, he/she can write a Wally as Flash story and let it find its own audience. (Or Kyle or Connor or even Ben Reilly). There's no need to kill a major character every summer to get media attention (because we all know they'll come back anyway. Bucky did so there is no permanent death any more, probably not even for Death.) Just allow creators to do what they're good at, pick and choose their favourite toys from the box and tell good stories that remind us all why we loved this stuff in the first place.
P.S. I might just add as a sidenote that if publishers would like to cancel one of the multiple Batman, Superman, Spider-man or X-men books or minis a month and replace it with a mini exploring a concept for a new genre (with no superheroes) I really, really wouldn't mind. I'd also imagine it may bring in new readers too without them having to go to Vertigo and independent publishers or manga for a little diversity.