[The Might]

I agree there was need for him to fall. This way he could be sent back as head of the Order, as what Saruman should have been, the one to lead the forces of the free people against those of Sauron.
As said in the UT, if Manwe sent Eonwe to the defeat of Melkor he would have also sent a spirit coeval in power with Sauron to his downfall, and by this Olorin/Gandalf is meant.
His rebirth with new powers was needed.
Of course he could have aided Sam and Frodo a lot, perhaps even save Boromir, but in the end I think it was for the best that he was initially defeated.