Employment Contracts-Satisfying Hackers AND Lawyers

JabberWokky asks a question that (intentionally or not) ties in to the one asked on Sunday: "My company is ready to hire several developers. Of course, the VC's lawyers say that there must be confidentiality agreements, non-disclosure agreements and non-complete agreements, to the point that the company would own private Web sites, or anything else written on your own time. I have one week to come up with something that will satisfy the lawyers, and still allow some freedom for the to-be-hired developers to work on side projects of their own, which I think is ultimately beneficial to everybody, including the company. Any ideas?" Certainly there must be some happy middle ground that can be agreed upon!

And yet here is a question for you: Why do Venture Capitalists think it's sensible to significantly curtail the rights of the people they wish to employ (in the name of confidentiality) when well- written NDA's should be legally binding enough to insure such things?