Yes, he has the physical talent and has proven many times in the past that he can be dominant at times. He just doesn't seem to have the mental game to be effective over the long haul.
I've been following this team for almost as long as it has existed. I've seem a lot of goalies come and go and I can count on one hand the number of goalies that had more physical talent (wearing the Blue Note) than Allen. I've seen a lot of goalies come and go with this team and throughout the league. It takes a certain type of mental toughness to be able to stand there facing 100 mph projectiles night after night and still do all of the things you need to do to be successful in that job. Allen doesn't have that. When he is "off" it is almost always between the ears. He gets lazy covering the short side post because he assumes "good enough" positioning, which is never good enough. He drops his glove hand because keeping proper positioning with his glove affects his ability to move his lower half the way he wants. This is more symptomatic of than causation to what I see as his biggest problem.
Jake Allen likes to slide. A lot. I'm not sure what drives this, though. Maybe he just likes to do it. Maybe he wants everyone to remember how athletic he is. Maybe he just really wants to get on the Top 10 saves highlights. Whatever the reason, it makes him a worse goalie. He does things because he can, without recognizing that he shouldn't. He is 27 years old, so he should be mature enough, physically and mentally, to be able to do the job he was trained to do, the way he was trained to do it. I think he lacks the focus and maturity to do the things he should do, and instead does the things he wants to do. I have 3 kids his age and one even younger. They're all like this, too. When making a save (or attempting to make a save) takes you out of reach of the blue paint when the puck is already in close, you've given up your net. No goalie should ever give up his net with the puck in close. Period.
Finally, I think we all need to recognize the fact that he is not getting better. Oddly, I have read before that he typically has a higher than average high danger save percentage than an average goalie but a worse SP on low danger shots than the average goalie. This passes the eye test with me, as he seems like he is always making the hard saves look easy and the easy saves look hard. The $64,000 question is "Can he get better?" Will he get better? I would argue that he can get better, but he won't because he doesn't want to change the way he plays. He may someday become a reliable NHL goalie, but I don't think losing starts to a backup is going to get him to change. I think the only way he does what he needs to do to be the goalie he needs to be is to be forced to move on. Coaching hasn't seemed to be able to get him focused in any sustainable way, so I think the only thing that will get him where he needs to be mentally are those five words an athlete dreads - "Son, you have been traded."