I remember an old thread on CW where people argued that the lack of a potent stock ball led to his downfall. It was also said that the batsmen had started to pick him and there was no mystery left in his bowling. I agree with the fact that the batsmen had started to pick him, but somewhere I don't think that Mendis cannot become a good test level bowler, a lot of spinners go through bad phases in their career and wickets don't come easily.
Its a bit tough to maintain accuracy with his kind of bowling, but more often than not, he is on target. His performance depends on how accurate he remains more than any other factors that people have highlighted over time. His main weapon is the carrom ball, and its the toughest delivery to execute, especially at the pace at which he bowls it. Mendis becomes ineffective when he doesn't maintain a good accuracy, not because of the batsmen picking him. His early success did not come with mystery alone, it was more because of his immaculate accuracy.
One thing where Mendis does need to improve is his inability against the left handers. He average 16.97 against the right handers and 50.82 against the left handers, with some experience, he will learn how to use the crease more effectively and try out different angles against the left handers.
The last time when he made a come back for a test series after some outstanding domestic performances, he played one test and picked 2 wickets in 43 overs on a flat wicket which had nothing for the spinners. Mendis was dropped after that despite of the fact that Rangana Herath, who has been SL's premier spinner since Murali's retirement, bowled 66 overs for 2 wickets in the same match, and even he was ineffective since the pitch was extremely flat. Problem with guys like Mendis is that there is too much hype around them and the moment they do don't do well, people quickly point out that the batsmen are picking him and he is no longer a threat. Comparison with Murali and the tag of a mystery spinner has hurt him more than anything else. He might not be the next Murali, but he can surely end up being a good test level spinner.
I can relate Mendis to someone like a Kumble, he never gave much flight and relied more on line and length and subtle variations to pick wickets, even he has had phases where he has been ineffective, but he ended up as a world class spinner. I think SL need to be a bit patient with him and give him some space rather than expecting him to replicate the magic he did in the initial phase of his career. He will improve with experience and should definitely get a longer run. It would be ridiculous if a wonderful talent like him gets wasted.