He's taken the Joker, a character depicted with bleached skin green hair and red lips caused by a chemical accident, and made it work well in the film by focusing on the characterization and psychology of the character.
I think people misunderstand what Nolan means when he says whether a villain will work in the world he's established. The mechanics and look of the villain take a back seat to the pyschological link the villain has to Batman and the story. This is an absolute necessity since Nolan has shown that in some cases, the Joker for instance, he tinkers heavily with the physical depiction of a character. This is offset by the writing of the villain with its emphasis on characterization and psychology.
Since Nolan has taken one of the more non-realistic villains and successfully adapted him to his world the question isn't so much whether the world is too realistic or whether some villains won't work b/c they are too outlandish but rather whether the villain will excel, not just fit, on a psychological level and can be written in a manner that's integral to the story and Batman.
In this case a character like Mr. Freeze would work (psychologically speaking). Mr. Freeze is cold, cut off, isolated, and alone. Bruce has become, in Nolan's world, more isolated and alone. He could even become more cold and cut off because he has lost even more and only has Alfred who (perhaps) he would push away.
Mr. Freeze would be like a mirror of Bruce.
There was a special on the History Channel, and now on the Dark Knight Blue Ray from what I heard, called "The Psychology of Batman."
Its all about Bruce's/Batman's psychology and the psychology of all his enemies. Its practically a how might Nolan portray the character sort of thing.
And the thing that was stressed was that the characters that usually work best are some sort of mirror of Bruce or Batman.
Penguin was Bruce, if Bruce gave into the greed and indulged.
Catwoman was a thrill seeker, and I think they said, like Batman if he used being Batman and a way to have fun.
Riddler was a narcissist, like serial killers who have to prove they are smarter and better and send letters to the press and police.
Joker was, in Nolan's words, the logical response to Batman. The escalation of crime in response to Batman's presence. He is the opposite of Batman, he believes people are bad and that chaos is the norm.
Who else did they mention, I am not sure but I could think of more later if they did.
But using the psychology of a character, and using the character that works best in a particular story (like they have been doing) and no just what characters would be cool is a really great way to look at it.
