Considering that he still wrestles just like everyone else, why was that stupid? How does him being a GM make it any worse of a decision?
Furthermore, WWE doesn't really do things for the future anymore. They will capitalize on anything that gives them a cheap storyline to pitch to fans. Knowing the nature of the company, it makes Regal's KOTR tournament win a great decision. Before the tournament, Regal was that British guy on RAW. Now he's the biggest heel in the company. Him having the power as GM to do things like turn the lights off fits perfectly with his claim that he's the "King" of the WWE, and it gets him over that much more with the crowd. This whole thing set ups perfectly for a conflict between him and perennial "anti-authority" babyface John Cena, and for an ongoing feud with Kennedy. This could be the best setup for a storyline that WWE has had in years.
The arguments against Regal winning KOTR just do not compare with the positive results it has had so far.