Snipping the ring wire removes that possible source of interference pickup, but the remaining extension wiring can pick up interference itself. Ideally the extension wiring would be proper twisted-pair cable, which would minimise interference pickup, but this is rarely the case - extension wiring is usually done with untwisted cable (which is cheaper). A filtered faceplate completely isolates the extension wiring from the ADSL signal, and gives a result which is effectively the same as plugging into the test socket.
I agree with roseway, an ADSL adaptor which seperates the ADSL before any extension wiring is involved is certainly this is the best possible way of doing things.
My point was that this modification has been designed for the average premises where people are not aware of what makes broadband work and not work and where the customer uses their ADSL equipment at an extension point. Being included with the NTE5 it will be fitted by default in the future with the hope of reducing ADSL fault reports the likes of which can be cured by disconnecting the ring wire.
With regards to twisted pair extension cable, all the proper telephone cable I have ever seen and used for hardwired extensions has been twisted, I reckon it must be part of the CW1308 specification. It is often commented how similar CW1308 is to category 3 ethernet cable.
Of course use cat 5 or cat 6 if you can be it is most unsightly if surface mounting is the only way to run it in. Another choice to make for cat 5/6 is whether to use plain UTP or FTP/STP screened cable for maximum resilience to sources of interference.
The classic example of un-twisted cable is I see quite a lot of friends who use flat extension leads/kits to get their router to go where they want it.