Recruit Generation before the last major change produced many recruits who were 99s in all their core categories. There were just too many elite players that the sweet 16 teams would all be identical with 99 core players everywhere. This needed to be changed for a more interesting game to be played.
When they made the change, they did accomplish not have that many 99 core players. One of the goals, which I thought was a good one, was to try to create a few "super recruits", your Carmelos, Durants, etc. They didn't quite accomplish this, but I do think this would be a nice addition to the game (perhaps 1 or 2 super recruits, 1 and done's, every season). There have been complaints that there aren't enough high potential mid-tier players out there for mid-majors to develop for 4 years and have them turn into solid players. I think this has been over-stated and that there are more out there than most mid-major coaches realize, but I do think adding some more high-potential low-rated players to the mix that could turn into great players would benefit mid-majors.
There are two other things holding mid-majors back that are not talked about as much.
1) Coach talent- Generally there is far more coaching talent in the major conferences. These major conferences are more desireable, in part because of recruiting money, but mostly because of higher baseline prestige. Higher baseline prestige makes it far easier to sustain a winning program. If you look at the most talented coaches in D1, they're probably coaching at major schools (not B baseline BCS schools, but A- and higher) because they want to win national championships and those are the schools that give them the best chance. If you look at their coaching resumes, most of them didn't spend that long at mid-majors because they were able to have pretty quick success and move to better jobs. D1 recruiting is brutal and you better have a really good plan, be very observant of the other teams, and be very smart in general if you want to succeed at that level. If you're recruiting against a bunch of people who are more experienced and have the advantage of a higher prestige (what you will be doing at a mid-major), you better be a damn good recruiter to have a good mid-major school. This is the same as real life and I don't see any reason why it should be any different. Building a good program at a mid-major is super hard in real life and you have to be a great coach to do it, just like here. If some great coach (or coaches) decide they are going to stay at a mid-major for a long time and not move up, they can be very successful (There are many examples out there, the best one is lostmyth at St. Bonnie's (I think).
2) Empty Conferences- Empty conferences not only hurt the conf $$ situation, they also hurt mid-majors in terms of scheduling because there are a bunch of games that, even if they win, mean nothing. This is also similar to real life. If a conference of coaches gets together in a mid-major conf, they can be successful (A10 in some worlds, WCC in some worlds, Ivy in some worlds).
Honestly, I think the talent of coaches is a much bigger factor in mid-major (lack of) success than anybody talks about and blaming it on recruit generation, which I think is actually pretty good (not perfect, but appropriately challenging), makes me a little frustrated.