He absolutely was the 8th best QB on the roster. It wasn't a matter of incorrectly judging his potential or talent. He sucked! Coaches don't, nor should they, waste their time "developing" a QB who is obviously worse than several of the QBs on roster.
It was up to Steve develop the talents necessary to compete for the job and luckily he had the drive to do it.
Nobody has said that coaches don't make mistakes. But it is their job to make personnel decisions and they are in the best position to make those decisions.