You can't compare Acid Arrow and Scorching Ray. Why? Because Acid Arrow is a very narrowly focused spell. When it's good, it'll be great, but most of the time, it sucks. In fact, I'd say 95% of the time, it sucks. Why? Because damage over time is not nearly as useful as damage *now*. When you start a battle... every round you *don't* cast your AA, you're losing 2d4 damage. If you hit a guy with only 8 hitpoints left and he dies in the first hit, you've wasted many many rounds of damage.... it's just not that great. Saying Scorching Ray is better than Acid Arrow is like saying Fireball is better than Secret Page. Of course it is, it's made to be.
Scorching Ray is made to be the main 2nd level damage spell, like magic missile and fireball.
Now that being said, I've seen scorching ray miss far too often to think it's broken. And 4d6 damage just isn't that much at 5th level. 14 damage. Woo hoo. My fighter does more than that in just a couple hits, and has a much better chance of hitting.
The extreme short range mean that if you're out in the open, you're often out of range, and have to wander into the middle of melee to use the spell. If you're in close quarters, you're almost always firing into melee with cover, which means a -8 to hit. Wizards do not like -8 to hit.
I've played with it, in many games, and it just never does as well as people expect.
-The Souljourner