This discussion has been done to death, but in my opinion, both sides share the blame equally on this.
The idea of the UFC co-promoting, especially at the time, was laughable. M1 should have opened with that, but eventually conceded for some sort of other accommodation. Ideally, an absurd amount of money, or retaining usage rights to Fedor's UFC footage. The UFC, for its part, should have understood that they weren't dealing with just another fighter. Fedor was the best heavyweight in the world, and well known throughout it. He deserved a tremendous amount of respect.
The bottom line is that the fans lost out, but not all business deals come together.
I'll say this though, if Lorenzo had dealt with these negotiations by himself with Dana no where near the table, I fully believe we wouldn't be having this conversation, because Fedor would have signed. Lorenzo was a shrewd negotiator who didn't let his ego get in the way of business. This is shown in him having to overtake the Melendez negotiations when Dana couldn't handle it.