You have to have supreme faith in a player to take him over a guy who solves nearly every need your team has, is a better player now, and arguably has more potential.
And that's probably where you and an NBA general manager differ in opinions. Bargnani has had a good season and recently in the past week is playing especially well in his teams playoffs. The top Euro league vs the NCAA's, hard to put one significantly over the other.
As for potential, it's all an opinion at the moment and I think most people are willing to trust the opinion of Colangelo on this one. If he sees Bargnani as the better talent, with all the access to video and scouting and other resources he has, then Bargnani is the pick.
The team needs aspect is irrelevant here. Both are power forwards who the Raptors are gonna try to pawn off as C's or let come off the bench for a season or maybe even play PF with Bosh at C. The Raptors already learned their lesson recently about picking for need and it ended with a gigantic waste of an 8th overall pick.