The (Broken) Natural State of Open Source
The natural state of a highway with a carpool lane is a free-flowing carpool lane and N lanes of bumper-to-bumper traffic. If the non-carpool lanes are moving freely, there's no incentive to carpool. Thus the sea of brake lights is the sign that the carpool lane is "working as intended."

Similarly, the natural state of an open source project is lots of code that still needs work. If the code is all ship shape, the developers will get bored and move on to other projects. A project that "basically sort-of almost works" is the sign that open source is "working as intended."
COMMENTS
What about Mozilla Firefox? Its functionality is up to that of its commercial peers. And Thunderbird is pretty stable, as well.

You're right, though, that many open source projects are rough around the edges. I think the fit and finish of a piece of open source software is a function of the project's maturity, the size of its community, and the jet-assist (or lack thereof) provided by commercial vendors with a stake in the project.
I agree, open source can create (and should continue to create) decent end products. Apache & MySQL are other good examples.

I'm thinking more about the state of the underlying code, and in particular open source libraries intended to be used as building blocks for other developers (FFmpeg, for example.)