The ending were not bad in and of itself. It's the fact that it made prior decisions in the game somewhat meaningless and diluted that was bad and the fact that we don't see that army in action at any point and time that makes recruiting mostly pointless. There were many, easy ways by which the player choices could affect the narrative, be it a cutscene in which your army is almost destroyed or is seen to actually win in case of an extreme military strength value, without affecting the endings as is. A narrative wrap up of what happens to the characters would have also been a welcome addition and meaningful customization would have made the ternary choice much more rewarding. It seemed like they thought of something good, but got tired at the end.
Disregarding this aspect, the ending is quite revealing, probing much deeper into the motivation of the Reapers than any "happy" ending could have. From what I understand, the hyper-evolved AI represented by the catalyst (that could be identified with the Reapers, or is much more advanced than them) has at some point won one or multiple wars with the advanced organics that created it and the mass relays. Such a war must have been much greater than it is conceivable at the scale defined in the game and would have run the risk of complete destruction of the universe: remember that these guys could survive and harness the resources within the galaxy core, so who knows what warfare resources they could muster. After winning (one or many times) the AI decides that war is statistically inevitable, as there is an nexus both within the mental evolution of the organics and that of the AI that they would inevitably create that would bring about conflict. Rather than wiping out all organic life, because it is impossible or wasteful to do so, the AI decides that the best course of action is reap the galaxy of all spacefaring cultures at a specific point in their development cycle: either when they are about to discover the secret of the mass relays or about the time when someone creates any form of relevant advanced AI. So in essence, the Catalyst & the Reapers act in the interest of their self preservation, the reaping being a preemptive strike. It may sound gruesome, but how they see organics is not unlike how humans may see insects, not evil or a nuisance in manageable amounts, but as resource-sapping pests when they overmultiply (or, in this particular case, evolve enough to be a threat to personal safety).
The other important question is: why is the AI permitting Shepard to break the cycle? I think it is because of the fact that this cycle let their differences go and united (more or less) for the common goal. There was enough organic intelligence in the galaxy to unite and not only put a dent in the reaper forces but also finalize construction of the Crucible, that no other cycle has accomplished before, yet all built up to it. Maybe the Crucible is an idea implanted by the AI to organic life as a failsafe - that they should build upon the idea cycle after failed cycle, and, when the time is right, finish building it in time. It required a lot of cooperation and selflessness and for most of advanced organics to put aside their differences and work together: geth and quarian, turian and krogan, humans and everyone else. Just think of the Proteans, who it appears were not so hot for loving thy neighbor and interspecies cooperation (and non-enslavement). Advanced as they were, there were not enough of them to make a difference, and they also fought each other, ultimately not finishing the Crucible.
The fact that the ending conflict of a game in which the central mechanic is war is resolved through dialogue is a clear, tongue-in-cheeck anti-war, pro-friendship, anti-waste message and that is cool. At least it made most people think, which is, for the most part, a trait specific to the realm of (good) books and films.
