I've been a keen observer of this site for many years and my observation has been that its strength lies not in its front page content, but the massive and dynamic nature of its diary and commenting community (of course, this is made possible largely by Markos' very shrewd management, especially his moderation system and the recommended diary system -- it would be hard to find a better blog manager than him, I think, so credit where credit's due).
My thought on blogroll is very simple: It should be like the recommended diaries.
Obviously, it's kos's site and it makes perfect sense he should include whatever he likes in the blogroll, just like he can write whatever he wants on the front page, so certainly a static portion devoted to kos's blogs du jour is appropriate. But as I said, the user-driven dynamic is what makes this place the exception, and it should also be embraced.
The idea is simple: Create a system whereby users can submit links to blogs and an approval based system of voting on which blogs are the best or currently have the most interesting material. In this way, given, say, 20 blogroll slots, you will likely have some permanent members (including, one presumes, some of those feeling the sting of rejection in recent days) and -- most importantly -- a significant amount of rotation and turnover. Obviously, Markos has software people who can play around and tweak a system like this until it works satisfactorily well, up to the standard of the recommended diary system, so that a precise discussion of the mechanics is not really important here.
Notice that this fundamentally changes the nature of the blogroll: In this framework, it is no longer a static element of the page that is largely ignored by most users, most of the time, but rather a constantly changing and potentially very interesting piece of the site. Because of this, one would expect it to draw more attention from readers and therefore be much more effective in generating traffic to other blogs. It also adds a new dynamic to this site by making it a convenient source of links to new blogs, served up daily along side the usual daily kos material, which one could reasonably expect to create more interest and traffic. For my part, I remember the addition of Recommended Diaries being a turning point in my interest in dKos, with my own reading increasing quite a lot immediately after its introduction.
Of course, there are questions of gaming and content that arise. Someone might try to fraudulently promote links or one might end up with 9/11 conspiracy blogs on the blogroll, but these are issues that can be dealt with much as they are with diaries. Perhaps a comment thread could be associated with each user submitted blogroll link along with a list of who's recommended the blog. Spam blogs and so forth would be caught relatively easily and could perhaps be reported by users through some kind of moderation. Again, these are issues of mechanics that could be worked out easily enough.