Well, yes, from a user POV it sucks, but from a service provider POV it's a pretty good trade-off; you get to do whatever you want, don't need to take any real affirmative effort to block infringing files, but as long as you react somewhat efficiently you have no liability. You can even make money from infringing content in the mean time.
If I'm Dropbox, I absolutely prefer the DMCA to a system where I have to make judgment calls that could leave me liable.
The real loophole in the system is not service providers honouring takedowns, but the fact that there's no penalty at all if a user does a successful counter-takedown, so there' s no incentive for content providers not to takedown virtually everything that isn't on its face abusive. If third party content protection companies faced legal liability for issuing frivolous takedown notices (say, they could be billed $50 per failed notice as a penalty for abuse of process) the entire system would stop in its tracks. Alas...