I just got the impression that Downey was not confirmed as agreeing to the Avengers movie, hence the creation of War Machine.
I cant see anyone accepting an Iron Man that wasnt Downey, but we have already seen that Rhodey could be played by anyone (and maybe he will take over the Iron Man armour...another possibility).

I'd also say that War Machine makes more sense from a government/military perspective if SHIELD is putting the team together.
With War Machine & Black Widow, you have two military based characters.
Add in a warrior like Thor and a soldier like Captain America, and it starts to look more like War Machine is the better fit than Iron Man anyway if they go that route.
Antman and Hawkeye would also be characters that could be adapted to be military types.

Snarf is shit. His death will be rejoiced!