He's playing because he offers something to the balance of the side, precisely because his bowling hasn't been rubbish. And obviously, in the last two series before this one he wasn't batting out of position. Unfortunately he is now, and not every batsman is capable of adjusting to the huge change in approach required. It doesn't make him a bad one day batsman, it makes him a bad one day number 7.
His bowling average in the Super Series ODIs certainly flattered him, but he was really very good with the ball in the CT as well as the DLF Cup, and the fact that he provided a genuine wicket taking option with the fifth set of 10 overs added a great deal to Australia's attack. His accuracy has improved out of sight in the last 12-18 months, which is the main reason he's a hugely more valuable bowler than he used to be. He's also worked a great deal on his variations and so on, as shown by the fact he bowled two pretty decent death overs the other night. Basically, he's a quite handy ODI bowler now, certainly clearly better than someone like Symonds or whoever else would fill in the final 10 overs, whereas before he was an extremely poor ODI bowler who was picked on potential to improve. There's simply no question that Australia is a stronger team at the moment with Watson than without him, provided he can contribute decently with the bat as he was before his injuries.