I'd say the fundamental reason why Hollywood does bad "live action adaptations" of anime/manga, disregarding factors like radical politics, moral panics, or just differences in culture, is that Hollywood just doesn't get what makes anime/manga successful in the first place; from how they structure story, setting , characters, etc, to the production quality especially for the most highly regarded stories.

I just think overall, Hollywood as an institution is just too inflexible and has become too creatively sterile to adapt fast enough to the changing market

Seinfield theme, please.