The 1e version is better, but with the flavour problem of why wizards don't bother to improve the spell. I can understand a spell being unreliable if it is wild magic, or draws upon a spiteful demon for power... but teleportation doesn't really have a reason for screwing up instead of game balance. Linked portals don't ask you to accept wonky flavour in exchange for game balance.
D&D teleportation uses the Astral Plane, so its unreliable targeting (along with that of
plane shift,
shadow walk, and similar) are explained by the fact that the planes aren't connected point-to-point and going from one plane to another will always involve a bit of distance distortion.
Sure, but the world becomes a very small place filled with nothing but set-piece combat encounters (kind of like an official 4e adventure

) with teleport.
I don't see why people seem to think that getting teleportation means just 'porting from one combat to another. One example of contemporary fantasy with prominent teleportation that no one has mentioned thus far is the Wheel of Time series. Partway through it the main characters rediscover the lost arts of Skimming (like
shadow walk) and Traveling (a
teleport/
gate hybrid) and occasionally use them to move massive armies back and forth. But one main character, Rand, is a ruler of many different cities and peoples, and he uses Traveling to meet with other rulers, check in on his followers' training, bring supplies to refugees, and plenty of other non-combat-related uses.
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Part of the issue with teleporting, I think, is that
teleport has stayed the same for 1e through 3e while the game changed around it. It used to be that around "name level" (8-10) you got some land, trained some followers, and settled down, and that's about when you got
teleport. You weren't teleport-ambushing mooks in a dungeon, you were visiting rulers on the far side of the world, administering multiple baronies, transporting massive amounts of material to build new wizard towers, and otherwise shifting from low-level tactical play to mid-level strategic play. Nowadays, without that explicit tonal shift from dungeon crawls to Logistics & Dragons, people just keep truckin' along with the killing of creatures and the taking of their stuff and expect the game to be "the same, but more so" when it really isn't and hasn't ever been.
Similarly, the examples that always, always, always get trotted out against free-target teleportation are LotR and Conan. In 3e, those are low-level stories, with most of the characters able to be statted out as 5th-6th level characters; in AD&D they're closer to low-to-mid-level stories given the slightly lower power curve, but the characters can still be statted out as 6th-10th level characters. Let's face it, "cross this wide ravine" and "climb this tall cliff" haven't ever been mid-level challenges, since casters have had low-level mobility spells like
levitate,
fly,
phantasmal force and similar since 1e, all of which are available at or before 5th level, not to mention more creative solutions like
charming flying creatures and such, and even with random spell acquisition it's exceedingly unlikely that no party caster has even a single mobility spell.
Another thing people tend to forget it that people in the world can take teleportation into account. Yes, people have said that they don't want to have to
dimensional lock Mordor, but why is teleportation special? The giant eagles weren't used in LotR until the end because they'd be freaking obvious to the enemy and would be attacked by the Nazgul, and no one is complaining about the effort it would take to have Nazgul patrolling all the time. If Sauron could counter physical fliers, there's no reason he couldn't defend against teleporters as well--and if we're using all the D&D rules, the Ringwraiths could counter Frodo's
invisibility with
see invisibility and protect their mounts from Gandalf's
daylight or
searing light with
darkness or
dispel magic, the heroes could defend against the palantirii scrying with
screen or
detect scrying, and so forth. Magic isn't always the world-breaking monstrosity people often make it out to be unless the world is basically "medieval England plus magic" and NPCs act like magic is some new invention instead of something that's been around for millennia.
D&D has been inspired by many sources with varying levels of magic, but it has never modeled low-magic settings well past level 7ish. While power curves have fluctuated with different editions, D&D has pretty consistently done low magic or swords-and-sorcery at low levels, high fantasy at mid levels, and mythic at high levels--this is the game where early modules had people killing gods by level 15, after all. Trying to "fix" individual spells to preserve a low-magic or swords-and-sorcery feel past the low levels isn't really productive when the rest of the game doesn't feel low-magic; if you want to run a low-magic setting, better to spot-fix things for that rather than trying to change the tone of mid-to-high-level play for everyone.