Let me explain why I call it the greatest setback. Urdu books and newspapers were written by hand and then lithographed. The process was slow, mistakes were plentiful, dots above and below letters were misplaced, letters such as daal and waaw were indistinct from each other, and many times the printing was illegible. Please try to read a book produced by that method, and then compare it to the same book typeset in naskh; you will note the difference. I have a copy of Divan-e-Hafiz published in nasta’aliq in the subcontinent, and another copy in naskh published in Iran. The difference in the clarity of text in the two is phenomenal.
This abortive attempt in 1960s to switch to naskh had nothing to do with religion or Arabization. Ayub Khan, in whose time the effort started, can hardly be accused of religion-inspired initiatives. It was simply to promote mechanized printing. If anything, later the religion-enthusiast Zia-ul-Haq did nothing to popularize naskh. Ironically, computer has saved nasta’aliq, since software is now commonly available which is now universally used to compose material for printing. But naskh is still clearer to read, and in my opinion it is not too late to give it another try, and use naskh, while reserving nasta’aliq for calligraphy. Undoubtedly nasta’aliq is elegant and no script can match its beauty.