If you compare Digg and reddit the differences are pretty big, beyond the basic premise ("links that people vote on") Digg had a very big focus on news and "social" whereas reddit focuses on content, whether that's farmed from elsewhere or created by reddit users. If you compare the top 100 links from r/all vs. digg.com/all you can see a clear difference in content.
A Digg type site definitely has a place on the internet, as it's been shown Digg still has traffic now, I just think reddit was the natural successor to Digg, regardless of the mistakes Digg made.
I think reddit vs. Digg can be compared to Twitter. Twitter would never have worked in 2001, the internet just wasn't ready for it, but in 2012 it's doing incredibly well. The internet wasn't ready for what reddit is now in 2004. Digg catered to what people in 2004 wanted, but it doesn't cater to what people want in 2012. reddit succeeded because reddit is more of a platform than it is a website, it offers the basic framework for a community link sharing website but their focus was loose enough (with stuff like subreddits) that it was able to evolve with the internet. If that makes any sense...