Azo coupling with arenediazonium salts - why isn't nitrogen gas lost?
A simple explanation would be that the displacement of a diazonium group by oxygen to form a phenol or phenyl ether linkage typically requires heating, indicating that it is a slower process than the very fast room temperature coupling reaction at aromatic carbon to form an azo dye. Why? One explanation is that the diazonium cation and the phenol or amine being coupled are a "soft" acid and base respectively, whereas water is a "hard" base. But a substituted phenol or aniline that could not form an azo dye might well form a phenyl ether with a diazonium salt, as you propose.