The dashboard isn't good at telling you whether you've seen a post already and moves much too fast for traditional blogs that post once a day or less to even show up within the first few pages. I don't think Tumblr has the right UI for an RSS reader.
Sure, but there are plenty of light, "pretty" blogs that I'll browse when I have time to kill, and tumblr wouldn't be bad for that. I'm not arguing in favor of Tumblr necessarily, but specialization. I'd love Twitter to have a separate but connected rss reader, for "twitter-like" content, for example. Any of these social network or quasi social network services could offer a customized rss reader - it's like having the best JavaScript "share this page on..." button possible.
