are vegetarians more ethical by not eating meat?

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Actually a rather recent phenomena and only in the industrialized world. Not all that long ago slaughtering animals was a family affair conducted right on the farm. You need a little perspective on history.

Right, but I'm talking about today. I'm not going to argue with someone who raises, slaughters and guts his own dinner, they are obviously okay with what is happening and what it entails. However I have the sneaking suspicion that the vast majority of people would find the things that are going on in the factory farms and mass-slaughterhouses of today quite repulsive indeed. That is why the process is so well hidden and only people who can't get any other job would do this work.

That's just not true, if you've been to the developing world, you'd know that they sacrifice and kill animals pretty much out in the open. In fact, hunting foxes used to be legal recently here in Britain, and if I'm not mistaken, people still go hunting in the United States.