The most recent awful champs would have to be GDR and Montano, I can't think of any other fighters in the last decade I would consider to be awful as champs.
There were plenty in the older school of the UFC though like Dave Menne, Tim Sylvia, Jens Pulver, Matt Serra, Carlos Newton, etc.
There have been some good fighters who over achieved and held the belt briefly like Bisping, Alverez, Holm, Forrest and I would say Couture at HW.
Yes Holm is not that great in terms of holding the title, lost on her first defense and she's been riding the wave of KOing Rousey when she was queen of MMA.
Edit: Forgot Esparza, she was actually pretty awful.
Lol isn't Couture a three time HW champ? Who defended his HW belt? Kind of a weird one to throw in there.
Alvarez is clearly not the worst fighter to become champ, that's kinda preposterous, TS.
Nico Montana or whatever is the extremely obvious answer, imo.