I didn't see the match, but all the signs suggest Nadal will be competitive on tour again. When I read Nadal's comments about his knee still hurting, I thought his comeback would be shortlived, and it still might be at the highest level, but at the ATP250 level, he is still too good for the competition.
The real test will be at the ATP1000 level and slams where he'll meet the top guys. Will his knee be able to stand up against the world class grinders/counter punchers he'll face? I hope it can, but off of clay I think it might be too much.
It is a pain that it is expect to disappear when Nadal's knee gets used to the competition level. Practicing, for example, the pain in the knee is lower, but at high intensity it hurt more. Nadal said that doctors told him that it is something that only requires time and there is no risk to be early injured again