What are the advantages and disadvantages of Nick as a narrator in The Great Gatsby?

The major advantage to having Nick be the narrator of The Great Gatsby is his intimacy with the situation. He is Daisy's second cousin "once removed" and is neighbor to the eponymous Jay Gatsby. 

Nick's position as Daisy's cousin and Jordan's boyfriend allows the reader to empathize with Daisy's desire to have an affair. Jordan, because she is in a relationship with Nick, details the affairs Tom has while married to Daisy. She tells Nick...

The major advantage to having Nick be the narrator of The Great Gatsby is his intimacy with the situation. He is Daisy's second cousin "once removed" and is neighbor to the eponymous Jay Gatsby. 

Nick's position as Daisy's cousin and Jordan's boyfriend allows the reader to empathize with Daisy's desire to have an affair. Jordan, because she is in a relationship with Nick, details the affairs Tom has while married to Daisy. She tells Nick about Daisy's happiness ("It was touching to see them together—it made you laugh in a hushed, fascinated way.") before the accident Tom has while driving with a chambermaid during their stay in Santa Barbara for their honeymoon.

In addition, Nick sees a side of Daisy most are not able to see. Daisy introduces Nick to her daughter and then, in a moment of honsety, Daisy utters her famous lines to him: "I hope she'll be a fool—that's the best thing a girl can be in this world, a beautiful little fool."

However, Nick's proximity to and admiration for Gatsby distorts Nick's telling of the story and makes him an unreliable narrator. Nick begins the novel by proclaiming Gatsby singular in that he had "an extraordinary gift for hope, a romantic readiness such as I have never found in any other person and which it is unlikely I shall ever find again." In addition, Nick never once condemns Gatsby's desire to tempt Daisy to infidelity, while it's clear he does not hold Tom's infidility under the same standard. 

While Nick's proximity to the story gives the reader a great advantage in understanding the motivations of the characters, his unreliability taints the events in the novel tremendously.