I agree about the government workers. There are many who work very hard and deserve their benefits and pay, but then there's the goof-offs who just milk the system and basically can't be fired. My uncle works for the government and has told the family some stories.
As for why NASA hasn't come up with better technology, they seem like they've been in a rut for 20+ years with this shuttle and have been victims of their own decisions at times. They were warned by a couple of Morton Thiokol's engineers back in '86 about the danger the cold presented to Challenger's SRB's O-rings, yet they chose not to heed that advice. They also knew these orbiters were aging and weren't going to continue to hold up that well to repeated launches, yet ignored some of their own engineers' warnings.
I think it's like any government organization - the people with the most promise are probably stuck in the middle somewhere and have to go through layers of management to get an idea across, while the big ego suits are running the show. Money is a factor too - there have been a lot of cutbacks in spending for the space program.