> their heart is usually at least in the right place
I've normally seen that people in role #2 are just not prepared for the hard conversations that come with being a manager. Sometimes, you have to call people out on poor or below-potential performance. If you do, I've found that most people will either pick up the pace or quit. If you don't, well... things get bad.
The unfortunate chaps in role #2 leave poor performers around to poison the team (most coworkers slack off when they see somebody else slacking, particularly if you have the corporate-standard opaque compensation schemes), avoiding dealing with negative actions until either somebody else comes around and fixes it or the team is killed. I was in this situation once, where a string of #2s had been managing a decently-sized development team I was merging with and it took several months for me to sort through the people, clean house, and build a functional team again.
You know the worst part? There were a few fantastic people who had utterly languished due to being surrounded by mediocrity. On the other hand, that was also the best part, because the "let's talk about how we're going to get you working on bigger and better things" talk is much more enjoyable than the, "concretely, we expect you to be doing X, Y, and Z at your level, none of which you are" talk.
Type #2 managers leave a trail of broken teams and wasted potential in their wake. I respect few things as well as working for an upper-manager who can pick up on that behavior and nip it in the bud. At least, I think I would, if I'd ever seen it :-)