I like PR, but the idea that you make the House more representative of the vote by appointing members seems disingenuous to me.
My solution: Close Runner-Up PR
How it works: Instead of the Minority Parties appointing people from a list, you choose your At-Large MPs from the candidates who lost by the smallest margin, until the proportion of Governing MPs reflect the overall vote.
First, what's wrong with Party-List PR? The "At-Large" MPs that are supposed to make up the voting percentage for the minority Parties are selected by the party leadership, which means:
a) They are beholden to the leadership (too much like the appointed Senators in Canada that everybody hates, but don't know what to do with, excepted appointed by Minority Leaders and sitting in the Commons instead of the Senate). If the at-large MPs ALWAYS vote with the leader, why not just let the leader vote count more times and save the salaries!?
b) You end up with a bunch of what I call "Bums You Can't Throw Out". The Party Leader and a few Party stalwarts always end up on the top of this list. What if you are in a star candidate's riding, but can't stand the person? Well you and your fellow voters trounce him/her by a wide margin and s/he gets to sit in the House anyway, because s/he's at the top of the Party's list. (John Tory faced this situation in Ontario when he was Provincial Conservative Leader).
Rationale for Close Runner-Up PR:
a) It's more fair - In the most polarized ridings, 50-50% split by having two MPs who will consistently cancel each other's vote on the most divisive issues. You make up for the nullifying effect of this split vote by having double the voice on issues that everybody in the riding agrees on. Other ridings don't have this double-voice, but they also don't have the nullifying effect of two MPs voting against each other.
b) The close runner-up is more "deserving", certainly than the unelected Party-List appointee. If you lose by 10 or 20 votes to the "winner", can it really be said that s/he has more of a mandate from the people than you do? You will have more competitive campaigns and candidates are more likely to modify their stance on various issues from the party-line to suit the local mood (think Red-Tories and pro-gun NDPers) - more representative that way. It will also mean that every At-Large member ran a "good" campaign to get elected (beating out the neighbouring runners-up in the ridings next door) and will be more able to stand up for principle in a free vote when the Party leadership is going the other way.
b1) Chips away at incumbent's advantage. Imagine a riding split between two (or even three!) candidates; come next election, everybody will be able to put up "Re-elect Me" signs. (Added since original posting)
c) It will encourage voter turn out. Voters stay away because they don't think their vote will make a difference. It's certainly true in the first past the post system in "safe ridings". But in the Runner-Up PR system, you might know that the candidate you support will not come in first, but if you can get him or her closer in votes to the winner than the runner-up candidate in the next riding over, then you get your runner-up candidate an At-Large seat - if your vote gets your runner-up to within 200 votes, and the runner-up next riding over lost by 201, your runner-up wins.
d) You can have Independent members elected at-large. In the Party-List PR system, Independents will be shut out unless they can come in first. Suppose candidate X has an argument with his/her Party Leader, but is a really popular former local mayor? Well, X can split the vote with his/her former Party's candidate and let a dark horse come up, as in the first past the post system, or maybe split the vote evenly enough to come in second with a narrow margin. The fact that "anything can happen" means people will want to come out to vote. True, it may be that the Minority Parties may come a little bit short of absolute PR, but the existence of independent voices is, I think, worth it.
e) You can have Government At-Large MPs! Suppose Governing Party has a candidate who lost by 20 votes to a Minority Candidate. Well you appoint that candidate as an At-Large MP. In a House of 300+ MP's, that's not necessarily even going to increase the number of At-Large members significantly (at most one or two more Opposition MPs). It won't happen most of the time, but the fact that it can happen makes it all the harder for a Government to claim that At-Large MPs are less "legitimate" than riding elected MPs.
You can modify this by dividing larger provinces into regions and ranking them according to disparity from actual vote to ensure At-Large MPs from more areas of the country.
Amendment: You can also simplify this by doing what you would normally do in PR, except give the At-large seats to the best performing candidates for the Parties that require the top-up. (Added since original posting)