I was in the computer games business at that time and was in the publisher's office that day when the production manager ran in and said “The Shuttle landed in the Atlantic!” He'd heard a report on the radio and I thought at first that they had done an RTLS abort and were flying back to Florida. Then we turned on a TV and saw the spilled fuel fireballs and the SRBs (solid rockets) still firing and knew it was a lot worse than that...

The Shuttle really isn't outdated per se, but rather too “advanced” in some important respects, and Max Faget did make (or was forced into) some bad guesses. Trying for horizontal landings (wings, etc) was a bad idea, using hydrogen fuel was a bad idea, solid fuel boosters was a bad idea... But the basic problems were senior management's fault – grossly raising the payload spec with funding to redo the design elements already completed for a much lighter lander, and going ahead at all without the money to even do the most basic flight test. Trying to do everything with one vehicle was not a good idea either.

As for cost, yes the shuttle is too expensive. But that's not the problem: it's the stuff you *don't* launch that is what soaks up the money. The incremental cost of launching a shuttle is maybe 10% of the operations cost *without* any launches: the way things are structured it doesn't cost much to launch an extra flight, and it doesn't save much to ground the fleet.

On the plus side there aren't any other systems with nearly this much flexibility, or any heavy lifters that don't exceed 3g's at any point for any payload mass or target orbit, or that can return anywhere near as much payload (not that the Shuttle's nose gear is likely to survive a heavy landing). It really can do a lot, but with hindsight what is really needed is cost reduction, not a heavy lifter with extreme mission flexibility and heavy landing capability.

None of the Russian systems can even come close to what the Shuttle can do ... but they can do what they do cheaply and reliably, and that's what matters. Moreover, they Russians have engineers with experience designing large rockets, whereas NASA has none (all of the Apollo/Shuttle engineers are long gone).