PN,
You are quite right, the system is what people make it. But if you want to go down that line of argument, then the logical conclusion is that the past decade or so - you might have a more informed take on the period before that - would seem to have brought in individuals more interested in their own futures rather than those they have been privileged to command. I already know the answer to that one!
I don't buy the overstretch argument. I'm not advocating huge ceremonies and parades, but it doesn't take a lot of time or effort to get people together and publically acknowledge a colleague's success. I did one on behalf of the CO just last Thursday and I think the guy was quite surprised and quietly appreciative that we took the time to honour his achievements. If COs really are too stretched to take 20 mins to congratulate their colleagues on promotion, then maybe they lack capacity and people skills to be a CO?