My worst Beta was my mother, many years ago when I was in high school. I finished (finished!!) my first short story. She'd always been supportive of me writing, so I handed it over to her. Some time later, she handed me it back. "Fixed." She'd re-written the darn thing, missed the point completely, changed my characters. It was horrible. I stopped writing mostly after that.
Several years later when moving I found my short story again. I read it. It had enough sap to make a tree jealous. Obvious plot, cardboard characters. I asked my mom about it, and why she hadn't told me that straight out.
She'd wanted to save my feelings, and butchering the work (my words, not hers) was the kindest way she had to express it.
Now I'm writing again, and I AM going to finish this novel. She will not be beta reading it. I may not even tell her I'm writing again until I have an agent/publisher.
And when I do get to the stage where I want a beta, I'm going to try to find someone who'll be honest and direct. I can't improve with 'I fixed this for you' or 'This is great' at all. I can work on missing information, plot holes, boring characters or any of the other flaws that could be lurking in my story, if I know they're there.
On the other side of the coin, I've been a beta a couple of times. The first time, I didn't give much critique. I'd nitpick a few sentences, but on the whole it stood. However, I don't really know if I was much use. ( "I couldn't find any problems" is a compliment, not a critique ). The author was a friend, who I personally respected, the story was already very polished, and it made it hard to be critical.
I have trouble critiquing published works too - I can't turn my internal editor on once it reaches a certain level of quality. I tried to analyze Lois McMaster Bujold the other day, and all I got was.. I don't always know how, but golly does she know what she's doing! Couldn't find a thing to change in the first few pages and quit.
Recently I started another beta, and I critiqued up the wazoo. It lead to a lot of rewriting, which I get to beta again when done. It was a great experience, made me look for things in my own writing, and I felt/was told my comments were -useful-.
What made it work (for me, and hopefully the writer), is that I could see problems in this round - the writing was at a stage where I had enough knowledge to critique it, and I didn't know the author at all, so I wasn't worried about hurting a friendship. Even when I was horribly honest about things I didn't like I was thanked. Plus, there were other readers on the project, so I didn't worry that my personal opinion was the only one weighing in.
It's exactly the experience I hope to be on the other side of one day, though the thought of receiving the sort of comments I gave isn't something I look forward to.