I've had the lens and used it on a K-5 for some time. It's not blazingly sharp at 16mm and f/2.8, but it's not disastrous, by any means. I'd say it's perfectly adequate for professional use. At least that's what my clients have said with their checkbooks.
The shot linked here, if I've done it right, was taken in my livingroom just now. The camera is autofocused with center AF point on the TV frame. ISO 80, to get rid of any noise issues, f/2.8 and 1/160 with flash.
I have also, as is my standard practice, added sharpening (level 100) in Lightroom 3. I was actually about ready to send the whole system back before I read Falk's post that Pentax images need extra sharpening. (The problem I had was that while resolution was great, sharpness was flat. That's what digital sharpening is for. Now the K-5 produces images that are on an equal footing with those from my 1Ds. They make great 20x30 prints.)
The image is cropped to the center 1/9th of the original area; in other words, the center third in each dimension.
As you can see (if I've linked correctly) the lens is perfectly fine.
Some suggestions:
* Make sure you understand what the camera is focusing on. Pentax AF points are unexpectedly (and unpleasantly, I think) large.
* Ditch the advice to focus at 50mm and then change to 16mm. I don't think the lens is parfocal. Even if it is, that's introducing unnecessary trouble.
* As the OP says, I don't think SR is an issue here. Certainly not at 1/1250.
* Don't be shy about sharpening.
* Do try liveview manual focusing, on a tripod. This bypasses the autofocus system and is quite accurate. If you get a bad image that way, the camera or lens have deep problems.
* Try to get your hands on another Pentax lens to try, even in a camera store.
Post some more images if you continue to have trouble.
Bob