Of course it's dysfunctional. Sovereign governments aren't super interested in reducing their sovereignty. The deal for the more powerful governments is they have a venue to legitimize imposing their will on other governments ... if the big 5 can come to consensus.

The deal for the less powerful governments is if they have a dispute with other less powerful governments, they can get it resolved by consensus of the big 5. If they have a dispute with a member of the big 5, there's an imbalance of power that the UN can't solve.

IMHO, this is better than the status quo from before the UN / League of Nations.

It might be nice to have an institution with the responsibility and ability to issue binding resolutions on all governments with regard to authorizing war/etc, but you can't really bind the big 5 (or at least the big 3) without their consent or overwhelming force.