Jack Nicholson played a cartoon character. Because Tim Burton directed a live-action cartoon of Batman. That's not to say it wasn't a good movie, or that Jack Nicholson didn't do a good job with it. It was a highly stylized movie that had a whole lot of style, but like most Burton movies, the movie was more about the style than it was about characterization or plot. Jack did the best he could with the character, and the result was good. But his Joker wasn't anywhere close to being as powerful as Ledger's Joker. It's not a knock to Nicholson. It's just that Ledger had a much more robust script to work with.
But saying Jack was just playing Jack-in-makeup is ridiculous. Sure, Nicholson's a little nuts, but he's not the Joker in real life. And he's certainly got a range of depth as an actor. That's like saying Robert Deniro is a bad actor because he always gets typecast as gangsters. I mean, look at Jack's roles in Easy Rider or One Flew Over the Cuckoo's Nest or, hell, Jack Gittes. His Joker was even distinct from his "crazy" roles. Joker was even distinctly different from Jack Torrance, his archetypical bat**** role.