I appreciate what you're trying to do here, but I don't think your conclusion is a fair assessment of the data. You say that there's a 2 in 10 chance of getting a hall of fame player or a 75-80% chance of getting a bust or a player who is merely "good". In that 75-80 percent you're lumping potential franchise building blocks like Tyreke Evans and Russell Westbrook with total washouts like Adam Morrison and Marcus Fizer. Even those teams blessed with Hall of Fame talent early in their career still need other pieces -- another All Star, a very good complimentary player, and some solid starters and rotation guys. So even if a top 5 pick doesn't earn you good odds at acquiring Hall of Fame talent (which nothing short of a crystal ball can grant you), it is still a reliable way to acquire talent.
To further illustrate, let's look more closely at your group of busts. In there you've got career-ending injury guys, you've got vastly overrated college players, you've got career journeymen who've found a role somewhere and are still playing, and you've got some young guys (Beasley, Thabeet) who could still move into the good or very good category in a few years. I'd also put Conley, Marvin Williams, and Tyrus Thomas as solid starters -- not All Stars but valuable pieces nonetheless. Now if you subtract some of the guys who were obvious reaches at the time and shouldn't have been top 5 picks anyway (Tskitishvili, Morrison, Shelden Williams, Darko) -- your 35% bust percentage falls somewhere closer to 16%, most of that attributable to injury.
Between those two polar opposites -- hall of fame franchise cornerstone and NBA washout -- are a lot of valuable players that can still help you build a winning team. And if you're not a complete failure at evaluating talent (cough, Jordan, cough) you're going to end up with a solid player with those picks more often than not. If you can make a trade to acquire the right player at the right time that's clearly a better move than waiting to see what the lottery will grant you. That would theoretically eliminate the possibility of failure as you suggested. But even proven talent doesn't always pan out as expected. You also have to account for the trade/free-agent busts we see every year like Hedo Turkoglu anywhere but Orlando or Ben Wallace in Chicago or Elton Brand in Philadelphia or Baron Davis on the Clippers. Or, for that matter, our own Mitch Richmond on the Wizards.