I agree with everything you said, but I wonder why you feel he couldn't make the adjustments to improve his game. There's no doubt he's built like a tree stump yet he seems to have an athletic grace that is simply short on muscle memory. I actually think he could become almost graceful if he took Tai Chi or modern dance.
He does surprise with his athleticism for his size but I just don't think quickness is ever going to be his strong suit. I'm not saying it isn't possible but I think LF better suits his athletic abilities. LF would allow him to use his great arm and take most of his "quickness" issues out of the equation. He also showed an ability to make diving catches when he was in RF this past season. LF also is slightly further right on the defensive spectrum that his bat would profile slightly better at.
This would also leave a spot open for Reynolds if they decide to keep him. I guess it comes down to what other moves the O's make in the offseason and whether they need him more at 1B or LF. One thing is for sure I would prefer Davis's glove over Betemit's at ANY position. I think Betemit should be the DH against RHP and Davis should play every day. The other options should be Reynolds, Reimold, and McLouth. Whichever player(s) out of those three they keep will help determine where Davis fits. My preference is still LF with Reynolds at 1B.