Yeah, the allure of the biome weapons is kind of gone. Pre 1.3, they could be the best weapons available. Their main selling point was that they were unique - only the Rainbow Gun has a lingering effect (I think?), Vampire Knives are the only weapon that can heal, Frost Hydra Staff was one of two sentry minions.
Then along came the Lunar weapons, which far outpace anything the Dungeon has to offer. (In a way, the Moon events and Fishron also outclass dungeon weapons.)
V-Knives can be improved - the Godly prefix is practically a requirement for them to be useful. That alone is sufficient to attack almost all bosses and all of the Lunar pillars with. Combine it with some Menacing accessories and other melee boosters and they can be quite formidable - around 100 points of damage per knife. But there is no denying that they are comparatively weak, and you'll be spending a lot longer fighting enemies with V-Knives than with other weapons.