Yes, it's dysfunctional. On the other hand: yes, they get things done. A perfect example today would be two developments in the backburner issue of food safety. On the one hand, there was bad news for the food safety bill, which appears to have plenty of votes but can't get to the Senate floor because of a hold placed by (sometimes) deficit hawk Tom Coburn of Oklahoma. On the other hand, the Senate did finally get around today to confirming Elisabeth Hagen's nomination; she'll be Agriculture Undersecretary for Food Safety, finally filling that position (although the fault here lies more with Barack Obama and Blanche Lincoln than with GOP obstruction).
Looking beyond that issue, the Senate did have a productive week, finishing the Small Business bill and, today, confirming some 27 executive branch appointments. Earlier in the week they confirmed a Circuit Court nomination. On the other hand, several other bills are on hold along with food safety, including the appropriations bills. And the nominations that were confirmed were, generally, non-controversial, with several important judicial and executive branch nominations, including Federal Reserve nominations, stalled. Still, one question about Senate "dysfunction" would be whether they can at least finish the non-controversial nominations, and they seem on target to get that done.
(Oh, by the way: Hey, reporters! Did Barack Obama's recent willingness to use recess appointments help to get Hagen and other nominees through Senate roadblocks? What do we know about negotiations between the administration, Harry Reid, various committee chairs, and the Republicans? Anything?).
So: yes, Republicans are successfully using Senate rules to slow action...but nevertheless, the 111th Congress continues to be very productive by historical standards. Yes, the nomination process is a mess, but it's not completely broken, and it's not clear whether rules reforms are the best solution.