Haaretz has an interesting article How great are the words of the sages? where in light of Shas's support of Moshe Katzav they look back at some of R' Ovadya's "bad" decisions and wonder how they could be daas torah.
In the summer of 2000, the Knesset chose the president of the state. At the last moment, Shas - upon the instruction of its spiritual leader Rabbi Ovadia Yosef - abandoned its ally Shimon Peres and voted for the candidate Moshe Katsav. They did so out of the desire to elect a religious president and someone of Sephardic descent. It is still too early to determine whether Katsav is guilty of the charges leveled against him. But it already can be stated that, whether he is guilty or not, he did not bring honor to his supporters and he will apparently never "restore the crown [of Sephardic Jewry] to its past glory."
The dispute is with the claim that his views are Torah and his decisions are holy and correct. Rabbi Yosef is an important leader who makes a great many wrong decisions, just like any other political leader.
Knowledge of halakha does not give him an advantage. Perhaps the opposite is true. For some of his erroneous decisions, Shas is paying a heavy price. For some of them, like the election of Moshe Katsav, we all are paying.
They have a point. The track record of the political decisions of the Charedi parties is not exactly stellar. How that fits in with the idea of Daas Torah is a very good question.