Any contender match would have been a risk, and if O'Malley were to lose that, he would likely never get another crack. So it makes sense that they're giving him a chance at the belt now. At least if he loses again, you can say "he only lost to the most dominant 135 champion ever" and justify another title shot down the line. If he lost to someone like Yan or Sandhagen in the meantime, he ain't climbing the ladder in that weight class to get back to the top.
If the Merab that showed up against Umar appears in this rematch with O'Malley, I could see him finishing Suga in the later rounds. The body kicks could be an issue and Merab will probably have to weather the storm early, but you have to put this guy out cold to beat him and I don't see O'Malley doing that.