I think the bookmarks UI has gotten so bad (or stayed stuck where it was instead of improving)... because so many people use tabs for what they could be using bookmarks for. A really well designed bookmarks UI might be able to do even better for them, but with tabs being 'good enough' (and better, for their needs, than the bookmarks UI they had historically when they started using tabs)... attention to bookmarks UI languishes.
A good bookmarks UI is a hard problem, and there's no guarantee you'll succeed at getting people to use it instead of tabs, so the cost-benefit-risk isn't motivating.
If someone did want to create a 'next gen' bookmarks UI... I'd start by intensively studying how and why people use tabs. :)
Bookmarks used to launch in a little docked file browser style window. It was ugly, but it was easy and quick to organize. You can still get it to behave like that, but it takes a lot more effort so, it has definitely gotten worse in my opinion. Certainly it takes more effort to organize.
Really, what they should have is a "Snapshot" option and a bookmark option where the snapshot saves a static local copy of a site and a bookmark saves a link. Bookmarks should have RSS integration so you can optionally sort by recently updated. History needs a meaningful search option and a way to group/nest by domain. We haven't even tried to pick the low hanging fruit.
Bookmarks are however, antithetical to Google's worldview and business model which I think drives some of their languish given that so much of the internet now relies on Chrome.
A good bookmarks UI is a hard problem, and there's no guarantee you'll succeed at getting people to use it instead of tabs, so the cost-benefit-risk isn't motivating.
If someone did want to create a 'next gen' bookmarks UI... I'd start by intensively studying how and why people use tabs. :)