I think Demyx was fully capable of being completely bad-ass.
Think about it- and this was probably already said somewhere along this thread: Demyx was part of Organization XIII. In fact, he was the third Neophyte to be brought into the Organization, which means that he was smart, cunning, and strong enough to withstand the change.
To be perfectly honest, I think everything we saw of Demyx was an act, and I'm not just talking about the emotions thing that all of the Organization members did.
Demyx was cheerful, and had that 'aw, shucks, I can't do this' attitude, but that doesn't mean that it was true.
I think it was a ruse, to fool Sora into letting his guard down a bit. After all, even Sora believed that Demyx was a 'kook' and that he was a wimp that shouldn't have been let into the Organization.
Well, that 'wimp' kicked my ass five times in Hollow Bastion before I was able to defeat him. He also turned dark and mysterious and... for lack of a better word... a true Nobody, saying 'silence, traitor', which, me being the girl I am, made me go 'oh, yeah'.
That's not to say that Demyx might not have been more of a cheerful character than the other members, simply because that was probably the kind of personality he had when he was a Somebody.
The last thing Demyx is, though, is a wimp. I had to level up several times to beat him, his water clones time-thingy made me practically pull my hair out in frustration, and I could be heard several doors down (I was in college at the time) screaming 'Damn you, Demyx, you SUCK!!!'.
Just because Demyx was more inclined to not want to fight didn't meant that he coudn't. I think Demyx was more the type to try to reason with Sora, before drawing his weapon and saying 'Ok, you asked for it, you wimp with a keyblade!'. That makes him smart, not weak.
And for those that might say that it said in the journal that Demyx was a poor fighter, remember- the journal was written by Jiminy, with Jiminy's biases and opinions. Jiminy saw that Demyx was defeated, and that he 'ran' after the fight with Sora in the Underworld. We can't take everything Jiminy writes down as complete truth, unfortunately.
Also, if he was such a wimp, stupid, and pathetic, how did he steal the Olympic Stone right out from under the noses of the Olympic Gods?
... Can you tell that Demyx is one of my favorite characters?