<------ Big ****in' fan. Been one for a long time. Dude reps hard. Fights hard and talks trash with the best of 'em. Ultra talented gound fighter who's equally comfortable, competent and effective standing. Showboats, plays to the crowd and is an excellent supervillain. Will throw caution to the wind and bang w/ a guy he could easily submit. What's not to like about the guy?
Diaz has is fundamentally sound, and it most likely takes an elite fighter to defeat him. Problem is, I think that is exactly what would happen. I don't believe he can take any of the UFC's elite. GSP would dominate him at 170, and let him try to compete at 185. Diaz has a well rounded game, and is someone that up and coming fighters can hope to emulate in the cage/ring.
He had lost 3 in a row before he was cut from the UFC. Like you said he can beat good fighters but can't get past the top guys.