I've seen this episode nominated as the one episode that fans would remove from the canon and it's hard to deny their logic.
Indeed. It's an episode that, considered as a self-contained slice of Trek, deserves to be on the "best of" list, but it's almost totally undermined by the lack of follow-up. Not that I'd want the rest of the series to feature the O'Brien that we'd be left with - and that's the problem, I suppose. DS9 might be more arc-driven than other Trek series, but it's still not a show that can tolerate having one of its characters suffer such a psychological breakdown that his place in the series needs to be renegotiated drastically. Which means it needs to step back from anything majorly disruptive. It feels strange to say something like this, given my general support for strongly character-driven stories, but sadly this episode is just too gutsy and powerful in regards to where it takes O'Brien. In the wider context of the series it's a failure, which is sad because taken alone it's anything but.