I'll make this short and to the point. You could argue that Carlos Condit is a bigger threat to the belt. You could argue he is the more skilled opponent. You could argue he is the more deserving of a title shot.
What you cannot argue is that stylistically, Nick Diaz provided the perfect opponent for Georges St. Pierre's risk-averse style. He would have come to kill or get killed. Nick Diaz would walk right up to GSP and face him without any fear.
Maybe he would have gotten decimated, maybe he would have been completely outclassed and embarrassed. These are questions which could have been answered if Dana White was not such a hothead. Regardless of those, factors, what we cannot deny is Nick Diaz would have fought.
What we have now is a fighter who provides the worst possible style match up. A fighter who has fought no one close to the caliber of GSP. A fighter who possesses heavy hands, which we know the champion will avoid engaging with at all costs.
Worst of all, he has no takedown defense.
What we have here ladies and gentlemen is Dan Hardy vs GSP II. We've got a contender who doesn't have shit on the champion.
Cesar Gracie is right, BJ Penn vs Nick Diaz is the main event. This is going to be 5 rounds of complete misery for the fans.