Whilst I am not in favour of more bureaucracy, splitting the two functions is important. There is a general perception (sweeping statement) in the UK that the CAA is too close to the carriers and the airport operators, not least as they are largely staffed by ex-employees of them. What is the balance between hiring people who have worked in the biz for 20 years and understand it and hiring people who have worked in the biz for 20 years and don't want to change anything?
I think our CAA, with the Safety Regulation Group at the Belgrano and the others in London has the 'split' about right. The two seem to work reasonably independently of each other as you'd hope. As long as the CAA employs people from across a broad range of the aviation industry then it should avoid a situation where people no longer wish to improve things.
I've always regarded the FAA as being generally very good (perhaps in the past they could have been better at listenning to the NTSB sometimes?), but from time to time large organisations need big shake ups to keep them in good running order.