Most people, at every level, are terrible at interviewing and hiring, and in fact a surprising number are conscious of that fact. As a candidate, you just have to know this going in, and expect to be made to jump through a lot of irrelevant/stupid hoops. Eventually you find someone who is adequately amused by your performance to give you a chance and hire you.
I don't think the recruitment industry is going anywhere anytime soon. I just wish there were some worthwhile recruiters in it (out of the dozens and dozens of recruiters I've dealt with, I've met one who is semi-competent (which is to say, not fully competent)). This is an area I'd love to try to startup in, I don't think any of the startups I know about are doing it right.