It's more complex than one thing. Theres not even necessarily anything 'wrong' (just incomplete) about the current implementation. Now, I like Survival, but I also bore of it easily. Enemies are single minded and if your careful it's relatively easily to be killed by surprise. I mean, sure, it will happen, but at that point little lapses tend to fall under the category of 'stupid/annoying''.
Combat is just boring. I enjoy now that I can fight back the dark with torches and slowly whittle into caves. I like fighting a few enemies here and there. But more? That just multiplies how boring and awful the combat is. Used sparingly, it is a tension builder and occasionally scary/fun. If it was ALL THE TIME? God. Notch removed the lower level spawning rules because they turned out to be stupid and made things into a chore. Right now you can get a good amount of mileage out of the game before things become easy. But they do become easy. When you get to the point where only the 'end game' (Creative stuff) content is fun, peaceful mode can make sense because all these enemies and being afraid of the dark just wastes your time. You're done with that challenge.
Not sure what notch should do. Htiting enemies with a stick isn't ever going to be rivoting combat. The bow helps, but whatever. I think there almost needs to be better enemies The combat is goofy and poor but having to use it to take on something big and scary would be interesting.
Either way, the game is still in development and I'm sure Notch realizes that some sort of problem exists.