What is your payscale like Rob? I had difficulty finding a good employee until I got above $15 an hour in pay. Probably actually saves me money in the long run, doesn't abuse my equipment, always shows up on time, does a great job.
I think using agencies can be useful and successful.
The recruiter is your pre-screener. I have found that sitting down with the recruiter and giving specific details about the work, the expectations, and build a relationship with the recruiter yields the best results. The recruiter gets paid by successfully placing people. The better they understand you, the better results you will have.
If the recruiter is just throwing everything at you without really screening, get rid of that agency. they are taking the "throw everything at the wall to see what sticks" approach. I don't have time for BS like that. I'm paying the recruiter to do their job and they won't, get rid of them. There are too many good agencies out there to put up with BS.
I've used agencies on big jobs where I need more hands-on-deck for a short period. specific tasks, specific goals. worked out well.
As for permanently hiring, refer back to my first paragraphs. the relationship and expectations are key to be successful.