In the context of this thread I don't see any difference between ATC and AG/AFIS.
After ATC has cleared somebody to takeoff, and cleared somebody else to join "crosswind", those two planes are on their own.
The former is totally on his own and provided he does not climb too rapidly he can reasonably expect his departure to be below other traffic. ATC can't assist him with that anyway.
The latter is responsible for slotting himself into downwind traffic, and likewise ATC can't assist him with that.
If ATC do more than that (e.g. delaying takeoff clearances to aircraft known to be rejoining the circuit, if somebody is being cleared crosswind) then I stand to be corrected, but I have never noticed anything like that.
I agree that this was an accident waiting to happen because so many people join "crosswind" way outside the upwind numbers, and even a PA28-140 can climb to circuit height in that distance.