Nelson would have been a phenomenal fit for the Wizards, giving them a subsantiallly better backup than Andre Miller who they traded Jan Vesely and Eric Maynor for in a three-way deal before the deadline. He can shoot, run an offense, and has extensive playoff experience. He'd be a lot more useful for them than he is for Orlando.
Nelson has one year left at $8.6 million on his contract, but it's not guaranteed. So the Magic had the leverage to push for what they wanted, which was probably a future first-rounder. (The Wizards traded their 2014 first-rounder to Phoenix for Marcin Gortat.)
Nelson is averaging 12.4 points, 3.4 rebounds, and 6.7 assists per game this season. Victor Oladipo has begun taking more and more of the late-game scoring opportunities for the rebuilding Magic.