I started out as a technician in Virginia and I was a VSP licensed Safety Inspector for 3 years. The program has a lot of problems as you mentioned. Some places will put a sticker on anything. When you reject a sticker the customer is mad. When you require a repair for a sticker, that is almost always your best sales tool ever. I always felt good about making the roads safer. The price for an inspection is below what it costs to pay most technicians, but that was generally gained back in repairs to pass.
I took issue with the dealership method of inspections. There was only 1 inspector on a team, who wrote stickers for everyone on the team, for cars he never looked at. That was a job requirement if you were an inspector, despite it being completely against the law. I left that job and later found out there are entire dealerships with only 1 or 2 inspectors writing stickers for more than 50 inspections in a day.
The state police support varies by location. In Virginia Beach, our station assigned trooper was trying to bust us and shut us down. In Newport News, our trooper was actually trying to improve vehicle safety and would back us.
Now working as a technician in Tennessee, I see a large loss of sales for legitimate safety related repairs due to there being no safety inspection requirement. I see many vehicles that would fail the Virginia inspection and I am horrified when I can do nothing about it.
Whether or not the safety inspection has an impact on safety involves statistics I do not have, but I can say with certainty that while i was a Virginia Safety Inspector I rejected and repaired many unsafe vehicles and felt good about it.