As to Amazon trying to jury in truly handmade ... Good Luck to them. I was a jury member for a website trying to do this and it was a nightmare. Every single tiny niche of the craft world fights for its own definition of hand made and trying to place a line somewhere is impossible. Last one in wants to lock the door on anyone who is different.
I don't know, my early prediction for Amazon is that they will succeed at this. I do believe it is possible to define guidelines for what is considered "handmade." Not that it will be easy, but Amazon might be smart enough to do it. In the experience you describe, it sounds like there were too many artists involved in the deciding. Self-interest can be removed from the situation. My question is, do they want to? They might eventually decide there's not much money to be made here.