Even if Hammer was supposed to be a credible villain, he'd just be a clone of Obadiah Stane. Seriously, he'd pay someone else to engineer a suit of armor FOR him, to get Tony out of the way so they could be the king of the hill. At least Vanko had the talent to make his own and customize it to use his signature whips (would have loved to see him try it with a four-armed suit) and had a vendetta against Tony so strong he was willing to make a suicide attack out of it. He didn't care about money or anything, and while that's a great motivation for a villain, being utterly hell-bent on the obliteration of his hated enemy, they didn't go deeply enough into it. If they'd given more time to developing Vanko as a character and villain, that would have made Iron Man 2 a whole lot better. That, and he ought to have had an actual suit built for the battle at Monaco. Seriously, him not having any armor on at all was just kinda...pathetic. Don't tell me that whip let him have the strength to manhandle Suitcase Armor Man, that was so lame.
Not only is the Mandarin a credible villain with much more far-reaching goals and abilities, but he's not an American businessman or someone with a petty grudge; the perfect new archetype villain that could have started off Phase 2. And they blowed it.