This wouldn't be the first time that MEL has been implicated as one of, if not the, worst airport that a person has ever been to in the world.
MEL really shot themselves in the feet when they redesigned the flow between the international departures customs area entry and the exit to the gate area proper. That is, the area where security screening is was compacted into a mess (not to mention the jugheads they station near the entry to check hand baggage weights, which is an additional hold up and a poor excuse to keep a few people in a job). The extra immigration counters were a great idea. Then you have this snail come rabbit warren spiral path through a slew of shops - including the cursory duty free shop - until you actually get to the gates. It's bad enough in most other airports that have a similar cheap and nasty chicanery (pun intended), but MEL would have to be the worst - in my opinion - in the world; maybe LHR T3 is the only one as bad or worse; STN may put the gates very far back but at least there is a reasonable path which is not impeded with vendors' paraphernalia; SYD T1 at least gives you a clear vision of the exit. At MEL T2, if you are late for your flight and have to run to the gate, there's a high chance you're going to collect a stand of liquor on the way.
The other comment often runs about the MEL arrivals process - a congested mess, plus people duly complain about the time it takes to unload baggage onto the belt and all the tape they need to lay out to make the inbound customs flow actually work.
As said, who should actually get the blame for these problems? The deal with immigration and other government processes may force airports to a certain design or flow which may be "anti-customer" but they otherwise have little choice. On the other hand, duty free vendors are often a huge source of revenue to the airport's owner, so that can have an (unfair) influence on the design of the passenger flow, and hence that's purely counted against the airport.
Finally, MEL inside isn't the most flash airport indeed. In fact, it does look pretty old; even the new gate area of T2 looks OK but is otherwise bland as anything - same design, just a new carpet smell. This discussion may not matter to most who spend 95% of their time in airline lounges, but it would be foolish to judge an airport solely based on the opinions of that demographic when there are so many more who don't experience the same thing.
I don't smoke, so I'm sorry but I can offer no opinion in support of giving smokers spaces at airports. Yes, "smokers are customers too", and I currently live somewhere which is very liberal about smoking compared to Australia, but I can't care less about smoking spaces in airports. I know some airports give the cursory outside balcony or cycled fume cupboard for the odd smoker, so be it.
All said and done, is MEL the worst I've been to? Hell, no! Of the international airports in Australia (HBA and CBR not counting), probably PER is the worst in my opinion. Luckily Perth Airports are actually considering a large makeover, though they are dragging their feet about it and have to be beaten with a huge stick by the customer airlines to actually do <expletive> about that. Come to think about it, CNS isn't all that flash and neither is OOL (the latter one lacking jetbridges, although that may not be a big deal to anyone either), though since they are small international airports I guess we don't really give them the same judgement. Ditto for DRW to a largely similar degree.
BNE I has the best aesthetics of all the Australian international airports IMO. For passenger flow, that's a tough one... I'd give it to BNE but, compared to SYD and MEL, there is an order of magnitude difference in traffic handled, so it might be unfair to judge it as such (if BNE had to expand and handle the traffic that SYD or MEL does, it might not do so well, not to mention it is slightly burgeoning at the moment with what it already has). People may whine about the SYD curfew, but putting that aside as a government problem and not one of the airport, SYD T1 does a better job handling the departures flow compared to MEL T2 in my opinion.
Worst airport in the world? MNL T1 is up there; I'm surprised the damn airport actually still works at all. At best you want to get in and out as fast as possible. FCO is a hole; rather embarrassing for a place which is frequented with so many tourists (for better or worse), methinks lack of improvement is mainly due to Italian government apathy. FRA (both terminals) would be an excellent airport if every passenger which went through it was a robot. In fact, I could gripe about a lot of airports, though I will concede some of them do a decent job (thus can't be called "world's worst" as such) considering the amount of traffic which is sent through them (LHR comes to mind in this regard). BKK may look good on the outside, but given they had a chance to do so much with a new airport when it was built, the inside is pretty ugly.