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Blackwater is used for security of sites and personnel. They don't take on tactical missions so I wouldn't call it a step back to the middle ages. I'm not defending Blackwater but don't say what they aren't unless you are talking out of scope for the thread title. I'd be willing to bet a virtual hundred dollar bill that Blackwater and that British outfit don't do any 'jobs' without clearance from their respective State Departments so don't look for them to conquer any countries at least in the near future. Those days are over at least as far as government sanctioned groups go. Non sanctioned groups are squeezed and forced out by governments. Today they free up government resources to perform the primary mission and not be part of the primary mission. Rent an army is here and won't be leaving and they will be security focused and not tactical combat focused. Your reasoning is too politically unstable for todays wars.
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I know that merc companies operate not only in Iraq, but in South America, SE Asia as well, and also can be hired bo non-US governments and organizations. I do not know their current focus of action in Iraq, but when they were brought in their cenrtred on patrolling oil fields and oil-related sites and installations. But I know that in Columbia they are very well conducting tactical operations, and are often are supported by regular army or air force when requesting for example transportation capabilities. you said they do not become active without order from state department. That is not true - they are a private business company that become actiove by order of it's customers. and that can be everyone having the money. Also, if hired by the US goivernment, their activities escape congressional control, and are not part of the regular mechanisms of political counter-countral which is part of the system of checks and balances. They do not report to the public/the people. And the secrecy of their operations is protected by American laws that say that the state does not need to take responsebility for actions and consequences of private enterprises.
In other words: such companies are operating in a legal no-man's land, and nobody really holds them responsible for anything. The deep entanglement of merc organizations in drug smuggling in Columbia - where they officially are staying to protect company properties and give support in the war on drugs, but in reality are fighting against those guerillas that are in the way of US biotech companies that wish to secure the ground with the ressouces they mean to harvest in the future, is a result. Locals complain heavily about their presence, and two years ago their have been several allegations of drug-related murder commited by mercs. You may say those figures are single exmaple only, and the company is not to be hold respoinsible for the failing s of their emploey. But that is wrong. The company IS responsible for what it's employees are doing, and are doing in a systematical, routine way. The miserable record of merc operations in Columbia - well rejected in the US, I know - is one of the more prominent reasons for the massive detoriation of US reputation in South America over the the last couple of years. It's just that here in the West not many people take note of this hidden, criminal war in Columbia that so misleading is called war on drugs, where in reality it is a war against resiotance about raising Us cpomany presence in areas of economical interest - drugs have little to do with it, and Americans seem to be satisfied anyway as long as it is labelleld "war on drugs" nevertheless - and then all is good.
You see merc companies, their legal status, and the freedom of action, and their support by the regular army, too rosy and too harmless.