Maybe Holmes had Watson stand in that location so that the cyclist could hit him and knock him down, causing the head injury to Watson. Thus when Watson arrived at the body he would be befuddled and believe it was Holmes. Didn't a building partly obscure Watson's view? Holmes could have arranged for Molly to bring out a cadaver and the people that were gathered round at the time could have been members of the Homeless Network. Or something like that.

Edit: Seems that Camilla already beat me to this idea.