Actually, I see the apparent lack of eugenics or genetic manipulation as signs that the
Psycho-Pass universe isn't as dystopian as it at first appears. There are good ethical reasons to prevent people from playing God, for example, when it comes to "customising" our bodies to order. That's very different from treating someone
after he has been diagnosed with neurological tendencies to criminal behaviour.
But, as you said, I think the more important consideration is that if people could fix themselves genetically before birth, then there wouldn't be a story to tell.
To be sure, the further into the series, we go, the less I think the
Psycho-Pass is really that badly broken. It's broken at the seams, but that's true for any society. In
Psycho-Pass, they have virtual-reality chatrooms. They have amazingly advanced holographic technology. They also likely have an abundance of "happy" pills to treat all kinds of mental-health problems like depression.
Seriously, I suspect that the average citizen is probably quite satisfied with his modern conveniences. It even appears that people have the choice
not to work if they happen to strike rich somehow. So, the Sibyl System really doesn't seem as restrictive as many critics make it out to be.