if only their noses weren't so...angular.

The voice acting and script could be a lot better too. Does Lucas write some of the lines?

At the end of the day it is a financial decision, we're talking about cost here, the basic Battledroid is thick as crap, but it is cheap to manufacture in vast quantities and in large enough numbers they do the job. For higher priority missions they employ the Super Battledroids and Destroyers, that aren't necessarily all that brighter but have the raw power to make up for that, but these are more expensive so are used less, and more so the Commando Battledroids that were seen in an earlier episode of the Clone Wars series, these droids were so sophisticated that they were a match for the average Clonetrooper which says a lot, but these would have been really expensive to produce so would be used rarely. Sure you could argue the Seperatists most be loaded, so why not use an entire army of Commando Droids? Why? Because loaded as they are I bet they're tight buggers who would go for the cheapest possible option every time.

Hey, remember they didn't lose every battle. From the suggestions made in Episode 3 once General Greivous was put in charge of the droid army they really started kicking pie.