No doubt Montresor could have stabbed Fortunato with his rapier after he had lured him underground. In fact, Montresor may have been planning to do exactly that, if necessary. Once Fortunato was in the catacombs his doom was sealed. But Montresor would have still had to dispose of the body. And he knew where he wanted to conceal it. If he stabbed Fortunato to death he would have had to drag the body all the way to the place where he finally sealed him up. It was much easier to have his victim walk there himself, and the horrible death Montresor inflicts on Fortunato helps achieve the feeling of sweet revenge he is seeking.
He can leave his victim to suffer for a long time. There is plenty of water dripping down from the ceiling, so Fortunato would not die of thirst. Most likely he would die of hunger, which could take as long as a month. There were many feudal lords who disposed of enemies in similar ways. They would simply have a man thrown into what was called an "oubliette" and drop the heavy stone trapdoor back into place, leaving the wretch to starve to death in complete darkness and eventually turn into a skeleton. The chains that Montresor uses to pin Fortunato against the wall had probably been there for many years and had been used for the same purpose before.
“Come,” I said, with decision, “we will go back; your health is precious. You are rich, respected, admired, beloved; you are happy, as once I was. You are a man to be missed. For me it is no matter. We will go back; you will be ill, and I cannot be responsible. Besides, there is Luchesi—”
Montresor is so confident that he can kill Fortunato once they are down below the palazzo that several times he even suggests turning back. But he has his victim hooked. If Fortunato had shaken off his intoxication and actually followed Montresor's advice about turning back, that was when Montresor would have had to stab him to death with the rapier concealed under his cloak. It is significant that Montresor mentions the rapier a number of times but never uses it except at the end to feel around inside the niche. Montresor could not have been sure of getting Fortunato all the way to that niche. It was becoming more and more difficult to believe that anyone would have stored a huge cask of wine so far away from the bottom of the cellar stairs. If Fortunato had not been drunk when Montresor encountered him on the street, and if Montresor had not kept him drunk, the man surely would have balked. He would have become suspicious and even alarmed. He would have wanted to get out of that stygian tunnel and breathe some fresh air. That was why Montresor equipped himself with a concealed rapier. A rapier is a thin sword, easier to conceal than a sabre, for example. Poe specifies that Fortunato is dressed in a "tight-fitting" costume:
He had on a tight-fitting parti-striped dress, and his head was surmounted by the conical cap and bells.
Poe probably had several reasons for giving this character such a costume. One of them was that it would show that Fortunato was unarmed. So he had no way of defending himself should Montresor attack him with his rapier. Montresor has apparently thought of everything.
Montresor was obsessed with impunity. He wanted to be sure to not get caught. Since they went down into the crypt and no one knew they were there, and he walled Fortunado up so that no one would be able to find him.
Montressor answers this question for us when he explains what revenge means to him:
I must not only punish but punish with impunity. A wrong is unredressed when retribution overtakes its redresser. It is equally unredressed when the avenger fails to make himself felt as such to him who has done the wrong.
A stabbing or something else would have gotten the job done, but Montressor wants to play a cat and mouse game with Fortunato, toying with him before killing him. He intends to "make himself felt" in a most delicious (to him) way before Fortunato dies.
Well first of all, it wouldn't have made a good story. If Poe would have just said, "I hated Fortunado; I swore revenge, so I stabbed him!!! Ha ha ha!", it doesn't make for a very good story. Then, we need to consider the author himself, and some commonalities in his stories. First of all, he likes to have a rather baffling and potentially crazy or insane narrator (consider "The Tell-Tale Heart" and "The Black Cat") that goes to great lengths to cover up their crime and not be discovered; all three of these stories have the narrator entombing the deceased (either in walls or floors) and then trying to cover it up and get away with it.
Along the lines of getting away with it, if he had just stabbed him, there is the chance he could be caught. Instead, why not encase him in the depths of the city, underground, where no one really goes, and where no one would find him? This is much more safe and would allow Montresor to continue with the knowledge that he was the only one in the entire world that knew what had happened to Fortunado. This type of control over his enemy had to appeal to him, considering "the thousand injuries" that he had suffered at the hands of Fortunado.
One last thing to consider is the narrator's state of mind. He is certainly quite insidious and villianous. He takes great satisfaction in the long journey into the depths of the catacombs; he thoroughly enjoys entombing his victim. In fact, at one point when Fortunado was struggling to escape, "The noise lasted for several minutes, during which, that I might hearken to it with the more satisfaction, I ceased my labours and sat down." Montresor sits down to listen to Fortunado's demise with sincere enjoyment and pleasure. This is a man who probably liked to pull the legs off of bug victims one by one just for the enjoyment of seeing the bug struggle. He is a bit sadist, and so the catcomb scenario worked much better for his enjoyment of suffering than a quick stab would have done.