I think this was true in ODIs, particularly when he first came into the side. In Tests he straight up just batted awfully though; it had nothing to do with where he was batting.
His bowling was fine for someone batting 6 and 7 and at times it even verged on being good enough to get him picked on bowling alone (or at least primarily bowling), but his batting over a sizeable period in Test cricket was just terrible, so he couldn't realistically be picked to bat higher than eight at this point. I'd probably still pick him ahead of Harbhajan, but he'd be batting below Ashwin if I picked him which doesn't really offer any genuine utility to his potential selection.
Jadeja is arguably the best
Indian fielder so there's definitely utility on offer there. Also while I agree that Jadeja will never that good a batsmen, his attacking playstyle has bailed India out a few times, it's also a bit unfair to judge his batting given the role he has been given, where most of the time he's just either been asked to or required have a go because of the situation. His bowling also is serviceable at best overseas and potentially match winning on slow/turning pitches.
The honest truth is that Jadeja was never allowed to play the all rounder role, he was playing as the 4th bowler yet being JUDGED as an all rounder this whole time. You can't ask a guy to be the primary spinner, bowl 30-40 overs and then come out when India have invariably collapsed to then play some magical match winning/saving innings ala Laxman.
Jadeja is a limited batsmen, limited bowler and a fantastic fielder. He is an all rounder in the most genuine sense (both disciplines roughly equal). This recent test match against SL was the PERFECT scenario where Jadeja could have played as the 5th SUPPORT bowler + Lower order attacking batsmen to accelerate declarations or chase targets. Ashwin's the guy with superior technique who can hang around and play that big innings, and Jadeja is the open stance'd aggressor who complements Ashwin's batting perfectly. So India with the both of them have 2 guys who become handy in a diverse set of situations and can be sent out one over another depending on the situation. Then you add Bhuvi/Bhajji/Mishra/Binny or whoever @9 and India have a reasonably lengthy tail along with a 5 man bowling attack.
Jadeja is the guy who balances India out in the truest sense, BUT you have to play him ONLY in the 5 bowlers including an all rounder role and not as a 4 man attack, otherwise it defeats the whole purpose.
Oh and in case I haven't mentioned already, Jadeja is a fantastic fielder, and can lay claim to having taken some wickets that unfortunately will never show up in his wicket tally column when people read something like 30 - 4 - 100 - 1 in the bowling scorecard.