Just thought I would throw in my two cents:
First, to answer the original question...I do think Simoni can challenge Armstrong. Whether he can beat him is a totally different story.
I have to admit I was very impressed with Simoni's form in the Giro. The man dominated in the hills, and for the most part held his own in the time trials. What struck me as the most impressive is how lean he is. If you look back at previous years, this is the leanest Simoni has ever been in any Grand Tour. Pair that with his innate ability to climb and you can probably come up with some ungodly w/kg figure.
Now, lets get to the real meat of the issue...can this guy actually pose a threat to Lance? My guess would be qualified yes. If we assume he can recover adequatley from his efforts in the Giro and arrive on form again for the Tour, my guess is that he will be very competitve in the hills.
Now, according to Simoni (in velonews) Lance has never been challenged by a serious climber in the Tour. Now correct me if I'm wrong, but I saw Lance go toe to toe with Pantani no less in the Tour in 2000. I think Pantani qualifies as a serious climber considering he owns the record on some of the most storied climbs in all of cycling.
For arguements sake I will assume Simoni can climb just as well as we saw Pantani climb in the 2000 Tour. Given that, I will also venture to say that as long as Simoni is a threat to Lance on the GC, you can bet your ass Lance will be on his wheel up each and every climb and stalking every attack.
Don't get me wrong, I would love to see someone challenge Lance and at least make him work for his fifth Tour. But what everyone (including Simoni) seems to forget is that this guy can climb just as well as anyone in the world. Furthermore, even on his "bad days" in the time trial, as exhibited by his TT effort in the middle of the Tour last year, he only comes a close second to the winner when he is having an off day.
So, in my humble opinion, Simoni needs to stop threatening Lance with coming to the Giro, and actually step up to the plate with his best form for the biggest and best bike race in the world. Then we will see how much panicing actually takes place, and from whom.