I agree, you do need to sign better. But the the game itself has now changed so the problem now is that those better people want Champions League football or an amount of money which is disproportionate to their caliber. And this is why, you now need a better manager before you bring in better players. You need a manager that identifies the glaring weaknesses within the team and the club and single mindedly works towards rectifying them even at the risk of antagonising the owners instead of someone like Rodgers who plays to the galleries with his weird statements every now and then.
After the Invincibles era, Arsenal have marketed themselves well with the 'underdog' tag; which is now something that Liverpool have to try to do. Granted that they still had Champions League football to offer along with that but again, that is something which will be easier to provide with a better manager than a better group of players; which is what Wenger did because all his best players left for greener pastures at the end of every season.
All this 'ethos' business is missing the forest for the trees, I feel. Gerrard did deserve a farewell but i think in their last 2 games against Palace and Stoke, Liverpool themselves fell to the very thing theyve marketed themselves upon- the cult of Steven Gerrard. The right way to go about it would have been to aim for succes and dedicate that success to him. Having said that, I do think that there should be an inherent philosophy for any club to follow. City themselves are doing it on some level with the "not only making better footballers but making better person" business but it should not be allowed to overtake the primary aim of any team- success. Nobody will accept "we play like shit but at least we stick to our ethos/ philosophy". Gerrard is gone now and Carragher was gone long before him. So from where does Liverpool find their next bonafide star(s)? What's the status of the academy? (Genuine question without any pun or condescension whatsoever!)
Lest I sound, RAWKish, I really do think that Liverpool is at the crossroads of time. They can either change with time, accept the modern nature of the game and adapt to it or get left behind by it and risk becoming a has-been club to which even Gerrard will think twice before returning as manager and whose success will be only in the memories of the grey haired.