She's not that competent, true--but look at who she targeted to kick out of the castle: Trelawney. What is Voledemort trying to do in Book 5? Get the prophecy. He can get it through Trelawney if he can get her out of the castle, where she has been protected by Dumbledore for 15 years. I don't think that's a coincidence. And notice what a fit Umbridge throws when she is stopped from kicking Trelawney out of the castle--Dumbledore says she may be able to sack Trelawney but Trelawney can stay in the castle and Dolores is NOT HAPPY about that one. Why? I think because she's just been thwarted in her effort to help Voldemort get the prophecy. (She also targets Hagrid, who is one of Dumbledore's most faithful people. Of course, he's also a half-breed, so that could explain it as well.) Note also that the first time he had detention, Harry's scar burned when he looked at Umbridge, and we never hear any explanation for why that is. And, Umbridge is a big fan of the Slytherins, especially Malfoy, and she hates half-breeds. Definitely Voldemort-like. I think she is his highest-placed spy at the Ministry.