Melo gets most of the blame, and I certainly understand that, but I think the real reason the Knicks are struggling (and Denver is thriving) is Billups.
It seems like something no one wants to talk about, but in reality, Billups is nowhere near the player he once was...and even the player he used to be would have been a terrible fit for D'Antoni's offense.
At this point in his career Billups is a terrible defender, he can't get into the lane, and he was never great at creating shots for others. With him running the point, the offense has completely stagnated, and they have turned into complete launchers, shooting contested shots that are often well behind the 3 point line. There is very little ball movement, and there is even less player movement.
Felton on the other hand had fit in very well with the system, and became a strong pick and roll PG who could penetrate and create open looks for others...like a homeless man's Steve Nash.
And of course in Denver, they had the same problem with Billups, which was obvious the way the offense was so much more explosive when Lawson was on the floor. And now that Lawson is getting starters minutes, they are thriving.
So yeah, Melo has not been great, but when you are looking for the reason the NYK have been struggling, the answer is at the point (and really, that is always the answer when you are talking about a D'Antoni team struggling).