No, the top allrounders would make it in on the basis of one of their suits.
Chris Cairns? If he couldn't bat, he wouldn't have made the team as a specialist bowler. His batting wasn't good enough to demand a place as a specialist batsman either. He's an example of a 'pure' all-rounder, somebody who is equally good in both disciplines. Watson isn't like this, he's a more of a batting all-rounder.
Unless you can make it into a side on the basis of 1 of your skills then you weaken a team and you cannot be a world-class AR. As I mentioned before, its something the top guys like Pollock, Kallis and Flintoff have done.
Who is to say Watson can't make the team as a specialist batsman? I think he potentially could, if he sorted his injuries and had a good season of domestic cricket under his belt.
What you describe is a downgrade at the number 6 position (ie there is someone better but not selected) which weakens the batting and a weak bowler that takes overs away from the top 4 guys. I cant think any team would be anything other than relieved if they saw Watsons name on a teamsheet as it gives a chink in the armour at #6 and takes 20 overs a game away from the more threatening bowlers.
The selection of an all-rounder is as much about team balance as anything else, and the situation within a team that could require the selection of Watson. Australia are going through a transition period, with a couple of already wayward bowlers in MacGill and Lee, as well as potentiall Shaun Tait (although it's likely to be Mitchell Johnson, still largely unproven) and they could do with the steadying influence of Watson to send down his 20 overs a game and conceed 30-40 runs, even if he doesn't take a wicket. Also, it's debateable in this situation if he will be weakening the top 6.
If a guy is to bowl some 'fill in' overs then it must be a player that is a specialist batsman (ie selected for that role) that can help out.
Michael Clarke could potentially fill this role, as could Michael Hussey, but Australia don't want that. They want 20 overs of steady bowling per game, some days he could take a bagful and others he won't take any, but he will always be a tricky prospect, where-as the part-timers like Clarke and Hussey will leak runs and ease the pressure.
If you want 5 bowlers then you must play 5 bowlers. Its a game you cant easily cheat. The inclusion of a Watson weakens both the batting and the bowling for a team like Australia.
Balance, by picking 5 bowlers they would have a very long tail, especially as Brett Lee is their best bowler who can bat. With an unproven opener and an inexperienced middle-order you are asking for trouble.
A team like NZ has always used players like Watson, but that is due to lack of depth and the need to fill holes. Australia with its depth and specialist talent doesnt have to try and do such things as it only downgrades both units.
Australia do have specialist depth and talent, I agree, but the selectors are looking for a class all-rounder to help improve the side, improvements and strengths I have informed you of, and in Watson they have a potential class all-rounder.