I consider myself a relatively dedicated Ret Paladin, and I DPS in karazhan. I persist in staying with Retribution despite its long-standing flaws, in the hope that I'll be vindicated by another fix that I only got a taste of during the beta of 2.0, when retribution was really silly overpowered.
I honestly don't think there's that much of a mechanics flaw standing between Ret and doing proper DPS; I have a terrible threat profile (the worst possible, really) so I have to be more careful on that front, but most of the time that doesn't really hurt me too much. We have good tanks. Command scales at a good rate with gear, as well. Which is the problem.
My damage is usually fairly OK; #3-#4 normally in Karazhan and often higher on bosses, though I think I make a much higher effort in terms of consumables than others do oftentimes, probably since I have more to prove. I also know for certain that a Feral or Enhance making as much of an effort for their specialty as I put into Ret would dominate the meters by a colossal margin.
I think a few improvements could be made for the Crusader Strike/judgement interaction, either cutting 1-2 seconds off the CS cooldown or extending the base length of judgements by a few seconds to allow a second chance to reset a judgement that is being pinned up; one chance just isn't enough, most of the time. I also think Sanctified Crusader could perhaps use being a bit stronger, mayhap by extending it to a 5pt talent; Ferals and Enhance shamans have obvious and powerful benefits, between bolstered totems and Unleashed Rage (and Windfury in general) for shamans, and LoTP and the Mangle debuff (and an extra full tank when needed) for ferals. My benefits just seem much more marginal in comparison. I provide 3% crit for the raid (when an improved Grace/wrath or a LOTP provides more than that to everone that actually needs it), a second blessing, and an Imp. LoH from someone who can easily afford to sacrifice his mana on demand, unlike the main healer holy Paladin; it's nice, but I'm not sure it's enough to be a real draw when Holy is what it is.
The biggest flaw, to my eyes, is a lack of appropriate gear. The problem is that I think blizzard believes that a good "ret" set is what I dub the "Blood Knight" set, Lawbringer armor pieces recolored to red and shades of purple. This includes items like:
(Ruby Helm of the Just)
(Pauldrons of Swift Retribution)
(Breastplate of Righteous Fury)
(Girdle of Gallantry)
(Ornate Leggings of the Venerated)
(Ornate Boots of the Sanctified)
(Bracers of Just Rewards)
(Gauntlets of Vindication)
This set is very very heavy on sta/int/str/spellpower, but rather lightweight when it comes to crit and so on, which are very important. It's just not optimal for doing damage as ret... honestly, I'm not entirely sure what it is optimal for, considering how many of the truly worthwhile pieces of it are sequestered in heroics. The only heroic element of it I've managed to acquire so far is the Breastplate, which is one of the less impressive pieces. Justicar Battlegear is well designed, but beyond those five items there is simply nothing to fill in the remainder. I've begun picking up the unwanted hunter loot in Kara by necessity, and mixing it with various purple PvP items. I'll get Justicar Gloves when we see champion drop, and probably the second or third helmet, and roughly similar priority if Gruul and Magtheridon are retuned such that they can be done without crazy consumables... but for all my other gear slots? There's just nowhere to go, really.
I usually have to force my way into raids a bit, by force of personality and by providing food consumables amongst other things around happily. My raid leader is fairly accomodating, but I am well aware that what he gets from me isn't much; an extra Imp. LoH, a second blessing, medium-ok single-target damage, and a decent and competent but highly eccentric player. Emphasis on highly eccentric.
I'm levelling a resto shaman to provide some versatility. I'm a little worried that once I get it to 70, I'll really never raid on my Paladin again.
It's just... insulting, really, that druids can happily spec Feral without being reviled, and Shamans are free to spec Elemental or Enhance and still be perfectly useful in raids, where I as a Paladin have to face the exact same bias I always did back at 60. Even Balance druids are better off than I am as Ret, in terms of popular perception. Paladins have to fight heavy bias any time they spec something other than Holy, simply because Holy is too amazingly strong for the good of the class.
It was the same story back at 60 when I was given our guild's Sulfuras. At least now there's the opportunity to prove that I'm worthwhile as what I choose to do, rather than it being obvious that I am just being humored. In some ways, that makes it worse...
Edit: in terms of DPS, I generally put up ~400 when solo and left alone to my own devices, but that usually includes a Mongoose or Major Agility and an Adamantine Weightstone, which I generally use as a matter of course. With a battleshout and LOTP on a raid mob that number climbs a good bit, since Glancing attacks still proc Commands, especially since I use full consumables on bosses by my own preference. If I get the opportunity I'll watch DPSes a bit closer on Aran saturday, if I get in. I tend to watch meters more than DPS, usually; I got #1 a few weeks ago on entrance --> moroes --> maiden --> opera, but fair's fair, I used a flask. At least our performance isn't so far behind that a 400 AP bump over everyone else isn't enough to overcome.