For sure, NII is more bureaucratic and policy-oriented than operational. The services are generally dependent on themselves for deploying and managing their IT. However, never mind the legal complications the Clinger-Cohen Act, which requires every agency to have a department-level CIO, would cause in getting rid of NII. Despite concerns I've heard about its effectiveness, such as dismissals of the CIO office's enterprise architecture efforts, there's still value in a central IT organization at the DoD, as NII fulfills any number of important roles.
In fact, there's a decent argument to make NII stronger, not weaker. The military is rife with a byzantine maze of IT fiefdoms even at lower levels, and the different services all still want to do things their own way. What happened to eliminating stovepipes? They need a guiding hand, and one that the services will listen to.
However, the DoD has sat without a CIO since John Grimes left more than a year ago, and a confirmation hearing scheduled for Tuesday for nominee (and current California CIO) Teri Takai was postponed. Though Dave Wennergren has done the job as deputy CIO and Cheryl Roby as acting assistant secretary of defense for NII, they don't have the formal titles, and with the formal title often comes some additional gravitas.
Takai has done been a force for IT reform in California, and before that was CIO at Michigan and led IT strategy at Ford. DoD needs someone to take the lead if secretary Gates wants not only a slashed budget but also effective, efficient IT, and though the fact that she doesn't come with military experience could be seen as a negative, Takai has shown she can get things done despite a big bureaucracy like the California government.