We have previously covered Daedalus and Monkey King Bar: http://teamn.forumotion.com/t593-monkey-king-bar-and-daedalus
Summary: Daedalus is better than MKB except when evasion is involved.
Daedalus for 5550 gold grants +81 damage and 25% chance to do 2.4x damage. This critical chance is equivalent to 35% more dps.
Desolator for 4100 gold gives 60 damage and 6 armor reduction. The cost premium of Daedalus roughly corresponds to the increase in bonus damage.
Disregarding for a moment the non-insignificant cost difference (cheaper items being easier to acquire and useful sooner), the question that remains is whether the 35% dps from critical strike or -6 armor is worth more.
Now critical strike will always provide a flat 35% dps increase, but the dps increase from armor reduction depends on the starting armor of the target. If you take a 6 armor target down to 0, this is roughly a 36% dps increase. The general rule that follows is quite simple. In situations where you have stacking armor reduction and/or against low armor targets, desolator is a great buy. Against high armor targets, the benefits of armor reduction are minimal and the reliable flat dps increase from critical strike is more solid.
Having thus generalized, following are some examples and exceptions.
Templar Assassin and Shadow Fiend - Armor reduction stacks, desolator is very terrifying.
Lifestealer - Feast is physical damage and will benefit from armor reduction but not critical strike, slightly shifting the math.
Lone Druid - Armor reduction from Desolator applies to buildings, synergizing well with this hero. Critical strike provides no bonus against buildings. Though Desolator on Lone Druid is non-main line, I personally love this item.
Bounty Hunter - Desolator is applied to every attack while critical strike is chance. Reliability on Jinada strikes is much more valuable.