No, I don't think moderators are evil; that's absurd. Moderators are people. Some are good and some are bad. But the nature of the job of a volunteer moderator is that it's going to be hard to get anyone to do it who isn't, as you say, going to give up and quit because of all the crap they have to put up with in exchange for no pay. Who's going to be left? The egotists, the fanatics, and the folks who see it as a useful tool to "change the world."

It's hard to picture a solution. Perhaps if moderation was an actual job; that would at least weed out some of the folks who are unstable or are just in it for internet points.