No, it didn't IMO. Here are my reasons:
1. Watchmen is a superhero story. An extremely dark and dysfunctional deconstruction of the genre that straddles the line between a full superhero story and "what would they be like in real life," but the scifi/fantasy elements were still there. The squid made the story more fantastical and interesting, which is the kind of thing I like to see when I read these kinds of stories.
2. Bubastis is pointless without the squid. She was another little scifi element, that served the story by foreshadowing what Adrian was capable of. In the movie, she just shows up without a word of explanation. I've heard that moviegoers were confused as to what the hell Bubastis was supposed to be. Saying that the squid was too hard for people to grasp makes no sense if you're going to retain Adrian's weird mutant lynx.
3. Removing the squid took out one of the comic's most disturbing and powerful moments. The scene depicting the piles of corpses filling New York's streets had far more impact than the bloodless and sterile nuking in the movie. Which is really strange, because Snyder clearly likes to show blood and guts and made several other scenes far gorier than they were in the original comic.
4. Adrian's plan doesn't make as much sense without the squid. In the comic, they explained that artists were hired to come up with disturbing things (sights, sounds, ideas) that would be broadcasted in the psychic shockwave and traumatize the survivors. This served to flesh out the "alien threat" so that people would understand what had "actually" happened.
The squid represented a powerful, but clearly mortal threat to the Earth. The ideas that it sent out would allow people to think that they could actually unite and fight the aliens. Dr. Manhattan, on the other hand, is a freaking god with the destructive power of entire nuclear arsenals. In the movie Adrian actually leads people to believe that he had wiped out not just New York, but capitals and major cities across the world. There is no fighting Dr. Manhattan; if he goes rogue then it's GAME OVER. Adrian's plot as depicted in the movie would have more likely caused a breakdown of society.