I look at recruit generation this way: There should be a few crazy dominant recruits, the one-and-done recruits (Rivers, Drummond, Davis this year, Irving last year (Sullinger and Barnes, too, would have left had there been no lockout). These guys can come in with super-elite ratings and maybe IQs, but there really should only be 2 or 3 of them. Then there should be another level of ~20 five star guys. ESPN had 22 five star guys, Rivals had 28 for this incoming freshman class. In Tark and Knight, there are 39 five star guys, which is far too many. Most of these five-star guys should leave early as well. In the class of 2008 (who would be seniors this year), none of the top 16 are still in school. The top players should be nearly-guaranteed to leave early. Among the next tier of players (3 and 4 star guys), there should be a few with killer potential, but mostly these guys should be pretty good players, but not overly dominant. According to rivals, there are about 70-80 4 star guys every year. In Knight this year, there are only 36 4-star recruits and 37 3-star recruits. Clearly, this group of players that are recruited by middling schools is greatly under-represented. If this group was accurately represented, I believe we would find many more mid-majors contending. I have found there to be some very low ranked players who do have great potential. A few more of these guys that would go to mid-major schools would be nice, but I don't think this is a main issue.
So for those who didn't bother to read all of that: There should be less five-star players, there should be way more 3 and 4 star players. There are already two star and below players that can develop into NBA caliber players out of mid-majors, coaches just need to look hard.