The big problem with olympic sports in the US is the teams are not playing together for months/years before the games like other countries. The US could dominate in basketball easily, but the players do not have the time to play together before the games. Other countries have that team together for years before hand.
Many of the best national teams are not unlike the US. They select players from various teams rather than playing together for "years". The US team is currently asking players for a three-year commitment, which is a longer commitment than most other countries require. Superstars Kobe Bryand, Dwyane Wade, LeBron James and Shawn Marion have publicly announced their commitment for the team.
In the 2006 World Championships, this team easily went through the group stage and went to the semi-finals, winning their games by an average of 25 points. However, against defending European Championship winner Greece, the US suffered a 101-95 defeat, putting in a dismal defensive effort (the Greeks scored 101 points and shot .625 for the game and resulting in the third consecutive failure of an US team to reach a final in international basketball. The team rallied for a win over defending Olympic champion Argentina (who had previously earned a win over the U.S in both the 2002 Worlds and the 2004 Olympics) to take home the bronze medal.
The bottom line is that the US is no longer the dominant force that they used to be in basketball.