This was in general well-put, if somewhat exaggerated. Some notes:
It is something of an exaggeration to suggest that Russia 'violated covenant' in sending Dennis Tito up. Neither the ISS project nor NASA had established any protocol about safety, training or purpose-related rules regarding what any member nation could do with its seats; NASA has been invited, repeatedly, to establish rules if it so desires. They have to date declined, though there is word that they are now considering such protocols, even as they make as-yet unsubstantiated accusations at Tito. NASA refused Tito training, though with the exception of NASA sims he has undergone as much training as some of NASA's own, previous space tourists.
As far as Russia's use of American resources, you've been buying a little too much coming out of NASA PAO. These claims were all quite vague and have never really been substantiated on any important point. While neither RASA nor NASA have been marvels of diplomatic conduct, Russia's real break with 'the covenant' has come because they simply no longer have the money and the organizational wherewithal to go ahead with a project this size. This is less a question of blame, then, than of ways of coping with a problem.
But the Russian contributions to the station are now largely done! At this point our ability to penalize them or renegotiate deals is quite limited; most of their work is complete or near-completion. The only major elements they have left to send in the near-term are the Science Power Platform, and some docking connectors, both of which are to my knowledge under control. In 2005 the first Russian lab module is supposed to go up- but on that timescale, there's a great deal more uncertainty about the station than just Russia's contribution.
Budget cuts back home already have NASA bailing out of as many parts of the station as possible. Congress said last session, in essence, that there would be no more money for budget overruns on major NASA programs. In the ISS context, the US Hab module has been cut, leaving us with a 3-person crew unless some kind of patch is found (NASA is trying to sell the Italians on the project right now.) We may also lose the crew return vehicle, depending on whether any alternative considered safe can be worked out, and a lot of more minor points that contribute to the long-term economic-ness and utility of the space station are, at least for now, on the scrap heap. Not to mention NASA doesn't know what they're going to do with the shuttle; I am very skeptical that we have 20 more years of shuttle lifetime ahead of us, but the X-33 debacle is entirely down the tubes. There's not a hell of a lot left to cut back unless the program is scrapped entirely.
What NASA should do is privatize out as many station functions as possible, set a minimum level of acceptable functionality, spend whatever they need to to get to that level as quickly as possible, and then bail from the remaining elements. The program was a mistake from the get-go, but dropping out now would spoil NASA's credibility with every foreign agency, most aerospace contractors, Congress, and US citizens, and leave them liable to lawsuits from the first two.
The problem with ISS, both as 'technology-research-on-the-ground' and 'science-research-in-space', is that it was a poorly focused program from the beginning. NASA is an enormous organization with a huge number of goals, an astounding amount of beaureacracy, and (as you said) a lot of political footballs getting grabbed. It can only be really successful if managed quite carefully. NASA projects should fall into two groups.
One is small technology research programs, funded as simple R&D on the ground, which when they reach the point of flight-readiness, get minimally-expensive and well-isolated test flights. The various technologies tested on Deep Space 1 were a terrific example. All moved from being pipe dreams, to being flight-ready, in a relatively smooth fashion (at least in their recent history; I'm not talking about aborted attempts at ion drives in the sixties.) (Whether any probes will now use those technologies is a separate rant.)
The other is extremely goal-focused, ambitious, large programs. Apollo, of course, is the model here. For a program like Apollo, you pick a goal which is ambitious but attainable, which will stretch the limits of technology you know how to do, but not include too many things that you have no idea how to do; it should be a goal that's important in itself, or at least breaks new ground. (Apollo was probably not such a good choice of goal in that respect, being rather footprints-and-flag oriented. But at least it was a specific goal we were committed to for our own, political reasons.)
Then you build it. You build it using the most conservative technologies that will get you to the goal; you don't attach the burden of developing extra stuff to your mission, which is quite hard enough already. If you want to develop that stuff, see project-type-one.
The classic example of not following these rules for a big project is X-33. Better known examples are ISS and the Shuttle. We'll take ISS. What was its goal? Well, put a station in orbit. But that's not such a good goal; it doesn't represent a dramatically new capability, it doesn't in itself extend or simplify what we can do in space. 'Ah', you say, 'but we learn about x and y and z in doing it.' This is true. But we would learn about those things in the course of pursuing a goal that we could make a more honest commitment to; learning about them, alone, clearly doesn't account for $60 billion. 'Well, but we want to research this and that and the other.' But these should be researched, either incidentally as a happy byproduct of a major goal, or in individual small research programs. 'But it's good for Russian arms control'. It is indeed- and even an obsessive like myself will concede that that's more important, at least in the short-term, than our work in space- but look what happens.
We don't design to a goal; we design to a set of specifications. And we have twenty different groups pulling different ways on the specifications. Congressment wanting things in their districts. Scientists from a dozen fields with conflicting requirements. Engineers with a clever new device we can install, for just a little bit more. A shuttle team and astronaut cadre that (for all my respect for them) are inclined to use as many launches as they possibly can. Diplomats who want to send money to the russians. Senators who don't want to send money to the Russians. Public-affairs people who are trying very hard to sell a program to the public that looks like 'Mir 2'. The list could go on almost indefinitely.
So you end up redesigning the station annually- this station has been redesigned something like seventeen times since 1981- and the money and the schedule will slip every time. Trying to satisfy all of these things, you develop an incredibly complicated critical path for constructing the thing- step two is delayed because of a hold on shuttle launches. Step three is delayed because Kahzakstan doesn't want launches on their territory. Step four is delayed because of a budget cut to pay for a tax cut. Step five is delayed because the Russians haven't finished a part. Step six is delayed because we had a problem with interfacing with the redesign for step four... We end up with a station that's doubled its budget well before completion, that will be finished so far behind schedule that the spaceworthiness of some of the older parts will be in real question, and that has tied up the entire human-flight side of NASA for fifteen years- without advancing anything enough to justify that. It's a program grown entirely out of control.
We're talking here about managing one of the largest efforts ever made by mankind, without knowing what it is we hope to get at the end of it. It just won't work. My recommendations for NASA's possible next goals:
Reduce launch costs by a factor of at least fifty.
Mars exploration with permanent infrastructure development.
A space station with a single and definite goal- a large port for interplanetary missions, or a modular permanent colony, or a manufacturing research plant. None of these would look much like the current station...
End of rant, for now.