Speaking from an insider perspective, the real problem with the Foreign Service is cultural. At the individual level, I would guess that somewhere between 50-75 percent of FSOs are hoping that Iraq and Afghanistan are temporary events that will go away so that State can return to the traditional diplomacy of dealing with nation states and Foreign Ministries. This attitude is reinforced at the organizational level by the fact that the Foreign Service is dominated by the regional bureaus, with the European Affairs Bureau (EUR) being the first among equals. The regional bureaus possess this power because they control assignments to the desirable and career-enhancing overseas postings at Embassies and Consulates.

State has enhanced the incentives for Iraq, Afghanistan, and Pakistan service so that there is now a broader range of officers serving in these countries than the early Iraq and Afghanistan mix of inexperienced junior officers and senior officers enticed by the promise of an Ambassadorship. However, I suspect that for many officers it is primarily a ticket punch to enhance promotion prospects and a first-time experience in dealing with pol-mil issues and working in a conflict environment.

State does have an office (S/CRS) that deals with reconstruction and stabilization and that possess probably the only real planning capability in the State Department. Because of bureaucratic turf issues, S/CRS has received only begrudging cooperation from the regional bureaus. S/CRS was blocked from involvement in Iraq, and was only able to get involved in Afghanistan due to an invitation from the military (to be specific - the 82nd Airborne ADC for Support) over the initial opposition of the Embassy in Kabul.

Although it pains me (a little) to admit it, State probably is not capable of taking on the reconstruction and stabilization role. A stand-alone expeditionary corps is the logical solution but as others have noted it will never happen because of interagency turf issues.