There's a great book out there - it is one of those smaller hard covers -  called "Heart of a Leader" by Ken Blanchard- it has pieces and excerpts from a number of recognized "leaders" and the content is a polite way to bring up the subject (in the form of a holiday gift). I believe that you have correctly diagnosed the "managerial" deficits at play and they certainly could create the unproductive environment you're experiencing now. It is a very uncomfortable situation for both the subordinates and the manager - he may know that he doesn't know what to do... he may know YOU know... he may be hoping that nobody puts two and two together... or he may be totally unaware all around...

I'd suggest trying the book - it's only around $7.00 - easily within most "interoffice" secret santa budgets.

Keep up posted...