The one thing that made him so popular in the wake of 9/11 is that he was thoroughly competent when it came to handling a crisis. His problem was that he was only considered an effective mayor in New York City when the city was in a crisis. Up until September 10th, he was actually a very unpopular mayor because of his heavy-handed approach to governing.
Now this might be just the kind of person you would think we need, but this kind of person actually makes for a poor presidential candidate -- he's simply not "friendly" enough to make people feel good about themselves and their country.
I would also add that just about anyone who has ever worked for Rudy Giuliani will tell you that he was a flaming @sshole on the highest order. Again -- great material for a secretary of defense or FBI director, but not for President of the United States.