No, its not over for him.
Some of the knee jerk-reactions on these boards are priceless. From - He will be the GOAT to his career is over. There just never seems to be a middle ground. Nadal will be fine, he is being cautious not to jeopardize his chances by overplaying. He made that mistake in the fall season to get that number one ranking secure, it cost him a legitimate shot at the WTF, a title he badly wanted.
He needs to give himself the maximum time possible before playing an important event like AO, even if that means not playing any warm ups. Sometimes you just have to work with what you got. Nadal will also see if he truly ready for Melbourne, if not, he will look at the season ahead, and understand where he needs to be in peak form. Nadal is far from done.