Dick not becoming Batman in that Knightfall story and it being some new character in Azrael will always be one of the biggest missed opportunities in Dick's entire history. It could have been a hallmark story for Dick's character but it didn't happen and Azrael took that moment. I know Dick became Batman in that Prodigal Son story shortly after, but by then the moment had been missed and now no one really talks about Prodigal Son anymore and it is kind of an irrelevant/forgotten story, but Nightfall and Azrael still live on.
When you go back to that Knightfall story it happened during the landmark Batman issue #500. Which is an incredibly important milestone for the franchise. Instead of that issue being Dick finally taking up the Batman mantel to take on Bane who had defeated Bruce it was Azrael who took on the Batman mantel and defeated Bane instead. For the rest of time #500 could have been this iconic moment for Dick's character that would have lived on forever and might have then been retold across other media in cartoons, animated movies, and live action, but it didn't happen. I'll always kind of be a bit sad about what kind of opportunity was missed with it.
I've always wondered why didn't they have Dick become Batman in issue #500 as that would have felt like a much more important moment to tell in that kind of milestone issue, especially given that like a year later they had Dick become Batman in Prodigal Son anyway. Was Prodigal Son mainly a response to fans being upset that Dick didn't become Batman in Knightfall instead of Azrael? Dick taking down the villain who defeated Bruce just feels like a more logical storyline to use, but I dunno. I always wondered if Dixon and the creators at the time originally intended to have Dick as Batman or if Azrael was planned all along. Not sure if they ever discussed their plans anywhere. Maybe at that time they didn't think Bane would turn into such a memorable character and Azrael was the character they thought would be the memorable one?