I think he's completely and retardedly moronic, but he's a television character. If he saw through every one of Team Rocket's disguises like we do or knew everything we know about Pokemon, then the anime would really suck *coughworsethanitalreadydoescough*...
And, the legends thing is just as retarded as Ash himself. Of course he doesn't go around capturing legends! They all have important roles! If he caught Lugia then the birds would be fighting forever. If he caught Celebi and Suicune their forest and place in nature would be unbalanced. If he caught the Latis Altomare would be screwed. If he caught Mew the Tree of Beginning would have died. The list goes on. He's at the very least smart enough to understand that.