Bond ETFs as a means to achieve risk parity

How is it possible that long term treasury bonds, which the government has never defaulted on, can hold more risk as an ETF then the stock market index?

The risk from long-term bonds isn't that the government defaults, but that interest rates go up before you get paid, so investors want bonds issued more recently at higher interest rates, rather than your older bonds that pay at a lower rate (so the price for your bonds goes down). This is usually caused by higher inflation rates which reduce the value of the interest that you will be paid.

Do you assume more risk investing in bond ETFs than you would investing in individual bonds?

If you are choosing the right ETFs, there should be a lower amount of risk because the ETFs are taking care of the difficult work of buying a variety of bonds.

Are bond ETFs an appropriate investment vehicle for risk diversification?

Yes, if you are investing in bonds, exchange traded funds are an appropriate way to buy them. The markets for ETFs are usually very liquid.

This is an old question that has been bumped because of an edit, but there's one point that I think was overlooked:

The "high risk" you're seeing for a bond ETF is comparing the risk of that ETF to other ETFs in the same investment class. So its risk (and average return) is high compared to other bond ETFs, but will most likely be less than the risk of equity ETFs (as will the returns).

NL's explanation of the nature of that risk (interest rate risk vs default risk) is spot on.