This is the right decision for Joba. (I can't believe I am giving the Yankees advice.) It will take a year or two for him to develop into a starter and he will probably have to spend some time in Triple A. In the end, when you have a pitcher with that kind of potential which is better: Having him pitch 200+ innings a year or 70 innings? It is simple math. You can always spend some money and get a passable closer, but consistent starting pitching is hard to come by. Also, from all reports, Joba wants to be a starter. If you are the Yankees, you have to make this guy happy.
A similar situation arose with the red sox and Papelbon a couple years ago. Papelbon wanted to be a closer (mainly because he is two olives short of a martini) and the Sox granted this request. It works for him and the Red Sox. The yankees should be the same with Joba. Make him happy. Make him a starter. He will have a longer and more productive career.