Well, I can give two answers to this.
(1) arXiv.org is amazingly successfully because people use it and love it. However, the low funding of arXiv.org also means that arXiv.org has missed many opportunities. Had we gotten 4x the funding we got, and spent it well, we might have come to dominate several more academic fields and we could have launched some awesome features.
(2) I think we could have solved the problem of "non-scientists" commenting, but there's also the problem that the physics community is very snarky. What if, say, a grad student writing his first paper gets a really nasty comment by one of the luminaries in the field? We didn't want to get involved in all the suffering that would have entailed.
You're totally right about the ineffectiveness of peer review and that was a subject that we talked about a lot. Some service for giving feedback to papers and evaluating their significance could have been a great help. Yet, a serious investigation of this could reveal that many of the assumptions about how science works may be wrong.
For instance, we found that by far, the papers on arXiv.org that are of most enduring interest are review papers. Like the U.S. patent system, scientific publishing fetishizes being the first to do something, not the first to do it right. Similarly, the idea of "reproduction" is core to what people say the scientific method is, but almost no scientific results are reproduced and many or most would not be reproducable if somebody tried.
Remember, despite peer review, the median scientific paper is wrong.