3 . in other respects ⇒ an otherwise hopeless situation
What does “in other respects” mean? In the end, is the situation hopeless or not?
It might be easier to understand if you read “in other respects” as “in other ways”.
Here is a real use of an otherwise hopeless situation from Wikipedia,
“She showed to the judge that Roland agreed to this and in return was to marry her for his release out of an otherwise hopeless situation of being imprisoned for the rest of his life.”
This hopeless situation refers to the situation that Roland must be imprisoned for the rest of his life. The situation would become an otherwise hopeless situation once Roland agreed to [this] and was to marry [her] for his release.
In the end, the situation was not a hopeless one. But if Roland chose otherwise, it would be hopeless.