Very good club teams, not so very good national team. At least that's the way it has been in recent ( and not so recent ) years. If you look at the top four English club teams you would probably just about get eleven top class English players from the four squads if you looked hard enough. I think that is the biggest factor in the lack of success at international level in recent years. It is definitely not the only reason though.
The FA ( Football Association ) have a lot to do with why England are not a force to be reckoned with in world football. Whenever they did get the right man for the job, they ( the FA ) always seemed to find a way of messing it up. 1990 and 1996 ( Robson and Venables ) were the most successful periods in the last 30 years, if indeed you can call it success.
The FA managed to somehow lose or dispense with their services though.
I believe the day they appointed Ron Greenwood all those years ago was a good indication as to what kind of people were running the FA at the time, and a lot of those old farts outstayed their welcome by many years.
They appeared to be on the right track again with Robson, after a disastrous time with Turnip head Turner, and looked to have finally got it right with the introduction of Terry Venables but wouldn't pander to his other business interests. Then of course they reverted back to the clueless years by making eye opening appointments of Keegan, Sven, and Maclaren < ( I don't even know if I have spelt his name correctly he was so bad and worthless and non memorable )
But of course when you are still paying Sven ridiculous amounts of money long after he is gone, you can only spend so much with his replacement. They seem to have a good man at the helm now with Capello and time will tell on that. They are certainly paying him enough.
The success in Europe for English club sides in the last 10 years is more down to the introduction of the "Premier League" and the way that whole product has been packaged and run. It's where all of the money is at tbh and has left Italy and Spain in it's wake with regards to TV and sponsorship money. And of course the EPL and the FA are different entities, with one getting it right in recent years, and the other lagging behind.
With so many non English players in the game these days, many argue it's the reason the national team has struggled, but tbh, I don't recall big international success in the 1970's or 1980's when foreign players were few and far between in English football. Big talent from all over the world coming to England has helped the technical abilities of English players and things like diet etc but at the same time it has stunted the progression of a lot of youthful English talent. It's hard to say which one outweighs the other really but an excellent manager/coach will always go a long way to determining the success of any team.