I was actually really excited to see this because a cover of Temptation that is "beyond compare" would be fantastic. Unfortunately I agree with you mostly.
I'm inclined to go a little easier on Krall here. I am very happy with anyone doing Tom Waits covers, and I have to assume she is doing it out of a sincere love of the original (since a cover from the middle of Franks Wild Years is not exactly a big record seller). It's just that it is hard to imagine how someone could actually compare with, let alone beat, Tom Waits - and this is one of his harder songs to do well, I think.
This does remind me of an anecdote. I once saw an interview with Bon Jovi where he was asked who his favourite musician was, and he said, "Tom Waits. If I could ever make a song as good as a Tom Waits song I'd quite music because I'd know I could never do better than that."
For all of our sakes, I am still hoping that happens.