Walcott scored a hat-trick on the last day of the season at home to West Brom, after the Gunners had gone three home games without scoring a single goal with Olivier Giroud up front.
The Frenchman has not netted since April 4th, a 4-1 win over Liverpool, and since then he has totalled eight consecutive games without getting on the scoresheet.
He was in prolific form before his recent drought, scoring 17 goals in all competitions in 2014/15, despite missing more than two months with injury early in the season.
Nicholas believes his game has regressed, and Walcott is a far better fit for the game against Aston Villa at Wembley.
He said: "At 26 and fully fit again, Theo is ready to be a top-class player and must start on Saturday. Giroud has been poor and is too static. If you’re an Aston Villa defender then you want to play against Giroud, not Walcott making those runs in behind.
"Arsenal’s passing dies around a static forward and that’s what Giroud has turned into in recent weeks. If Walcott starts then that pushes the defence 10-15 yards deeper to cover for his pace and allows the creative players room to work and cause problems."
The Gunners have been flat in attack over the past few weeks, and Walcott has forced himself into the conversation after his sharp display against West Brom.
Arsene Wenger has a huge decision to make, but will hope whichever way he goes, his attack will be too strong for an Aston Villa defence which leaked six goals against Southampton a fortnight ago.