More repugnant than that is that naive average utilitarianism would seem to say that killing the least happy person in the world is a good thing, no matter how happy they are.

This can be resolved by taking a timeless view of the population, so that someone still counts as part of the average even after they die. This neatly resolves the question you asked Eliezer earlier in the thread, "If you prefer no monster to a happy monster why don't you kill the monster." The answer is that once the monster is created it always exists in a timeless sense. The only way for there to be "no monster" is for it to never exist in the first place.

That still leaves the most repugnant conclusion of naive average utilitarianism, namely that it states that, if the average utility is ultranegative (i.e., everyone is tortured 24/7), creating someone with slightly less negative utility (ie they are tortured 23/7) is better than creating nobody.

In my view average utilitarianism is a failed attempt to capture a basic intuition, namely that a small population of high utility people is sometimes better than a large one of low utility people, even if the large population's total utility is higher. "Take the average utility of the population" sounds like an easy and mathematically rigorous to express that intuition at first, but runs into problems once you figure out "munchkin" ways to manipulate the average, like adding moderately miserable people to a super-miserable world..

In my view we should keep the basic intuition (especially the timeless interpreation of it), but figure out a way to express it that isn't as horrible as AU.