Being fair, people usually forget - when Watson first came into the Australian team it was as a raw fast-bowling all-rounder who batted at 7. He was, at best, a lower order dasher with the bat. But he was seldom needed in a world that contained Adam Gilchrist, and an attack consisting of McGrath/Gillespie/Warne and either Lee or Kasprowicz. The thing that made him so attractive initially to selectors was that it provided a way to have both Warne and MacGill in the side, whilst also having a third quick - something which we barely did.
Keep in mind, we didn't have a test all rounder for about 20 years. Partially out of not needing one with our attack, and partially due to the two best all-rounders in Aussie cricket during that period being Ian Harvey (never a red ball prospect) and Andy Symonds (really, a batsman who could bowl a bit in red ball cricket). So Watson was still regarded as something of the missing link at that point.
And then injury to his back (he had more than one major back surgery, I recall) meant he had to slow the pace down from high 140 kphs to mid to high 120s. His response was to seriously upskill his batting through spending literally thousands of hours in the nets. The problem is, whilst that's left him technically solid, it means he still only has the instinct of a No. 7 - hence all the LBWs and bowleds. Until he's in, set and seeing it like a beach ball he's still a lower order dasher trying to find his feet. That's why he's so lethal in coloured clothing, because the ball doesn't move anywhere near as much.
