While I'm no big fan of the Vulture, and believe him and Sandman would have felt a bit of a limp progression as villains (the obvious choice was Lizard and HarryGoblin), I think the biggest issue Raimi faced was that, in being forced to include Venom, he basically shoehorned him into the film.
Raimi reckons he had "a plan" for Vulture? Well, once his plan got changed and Venom was included he should have reworked and rewritten the enitre film/scirpt to include the new character. It seems he got someone in who knew Venom and got them to lazy up the concepts. The idea that Venom can't handle their own film is complete crap, to be honest, but in a film with two other villains there's not enough time for Venom.
The way I see it, they should have sat down and tried renegotiating it into two films, like a lot of people believed it would be from the start (and probably should have been): Spidey and Harry have issues, Spidey acquires the black suit and begins changing, Sandman is born (DOESN'T KILL UNCLE BEEN THIS ISN'T 1989 ANYMORE!!) and commits crimes, and Eddie tries to steal Peter's job by being an absolute prick-monger. Sandman is your physical villain for the first film, with Harry pulling strings and pushing the symbiote's influence over Peter. The film concludes with Peter turning Heel, washing Sandman away/killing him, and leaving Harry scarred and in a coma, with Mary-Jane leaving town. Suddenly distraught, Peter rids himself of the suit, which finds its way to Eddie, ending with his transformation.
The next film picks up with Peter trying to make amends for his actions and visiting Harry, only to find him gone. In attempting to track him down as Spider-Man, he is attacked by Venom in a fashion/fight similar to Peter/New Goblin, ending with Venom disappearing after one-upping Spidey due to him not setting off his sense. Peter struggles throughout the film to reconcile with Mary-Jane, as Eddie/Venom stalk, taunt, and attack him throughout, only to then have to face Harry, who goes all Goblined up in this film and attacks Peter directly at his apartment (Harry being more of a Hobgoblin than a Sky Surfer) and they have an epic mid-air, cross town sky battle. (Hopefully during this Rami would include some indication as to why Harry had visions of his father before taking the serum, but whatever) The fight is interrupted by Venom, who attacks Harry and mauls him, damaging his glider and causing him to flee. With this distraction, Spidey escapes. Mary-Jane comes to town to give Peter his ring back and talk, only to find his apartment wrecked. She then goes to see Harry and give that speech that was in the trailers and to help him, and her by extension, begin to sort their heads and hearts out. Leaving, she is attacked by Eddie (not Venom) and forced to draw Peter out in the open (similar to Harry's asanine plot) Like a fool, Peter complies and attempts to talk Eddie down, but instead has to fight Venom one more time. Though Venom overcomes him, Peter is saved by Harry, who ultimately sacrifices himself as in the film, in a way that reminds Peter of the symbiote's weakness and ends in a fashion seen in the film proper, only with less ambiguity over Peter and Mary-Jane's successful reconciliation.
It would have been 50/50 whether to bring Sandman back into the plot, but I think having him physically and special-effects-wise dominate the first film as the muscle and the misguided criminal would have been (a) truer to his comics roots (b) forgone the need to link him to Peter personally, instead having him become a superpowered punching bag for Peter's issues caused by Harry/Brock/the suit and (c) still been very impressive to see, and could have still included his issues with his daughter. I think ending the first film with Sandman's demise/Harry's scarring/coma says more about Peter's actions than Sandman coming back to life, but obviously there would be enough leeway and ambiguity to include him again. The death of Venom probably would/could/should have transitioned as well, but if they wanted a spin off then I suppose an ending similar to Venom's first comic defeat would have worked just as well, and re-enforced how Peter is now in control enough to not cross that line (as he would have with Sandman).
But that's hindsight for you.