[orgopete]

This guy proceeds by Single Electron Transfer mechanism not cation. Iodine is good at SET accepting into its LUMO.  Phenol can be made 100% yield from benzene. Radicals are more stable in aromatic solvents because they do not tunnel as much.  Cl· in benzene bounces off the aromatic pi orbitals on the order of 10^-12s.  http://cdn.name-reaction.com/assets/_reaction_images/_png/sandmeyer-reaction-m-aba3db08fd457c99e0a770dd43ef07f0.png 
The Cu is used because it provides a different mechanism than cation which is exactly how it catalyzes the reaction through lowering the SET pathway below cationic formation. Cu(I) because it can easily donate an electron.

I don't know if there could be another explanation or not, but I think a single electron reaction is more correct. Aryl carbocation is not. I seem to recall George Olah talking about aryl carbocations about 30 years ago and he was saying he could not find any examples of their formation. Not only is it difficult to form an sp2 carbocation, but an aryl carbocation is even more difficult. I'm not aware of any change in this generalization.

Keeping the diazotization cold is to avoid nitrite replacing the diazo group as I recall. I didn't know why very harsh conditions were used in the hydrolysis to form phenols, but I saw a reference that it is done because the phenol is more reactive and can react with the diazonium salt.

[pgk]

According to the “Vogel’s Textbook of Practical Organic Chemistry”, phenols are prepared in good yield from aromatic amines, by the Sandmayer reaction and a farther acidification with H2SO4 together with heating up to boiling, otherwise oily and waxy products are formed.
A reasonable explanation of all above, is the cationic dimerization and even polymerization of the aryl carbocation that leads to biaryls (and even to polyarylenes). Thus, the aryl carbocation is stabilized in presence of concentrated H2SO4 and therefore, it hardens and prefers to react with the H2O hard base instead of the benzene soft base.
Although, an explanation that is based on the Gomberg–Bachmann reaction is cited in the same book, but only as an hypothesis and not as a definite conclusion. On the flip side, please note that the Gomberg–Bachmann reaction occurs in a highly alkaline medium, while the conditions of the Sandmeyer reaction, are highly acidic.
But, let's agree that in the case of copper(I) mediated coupling, the reaction occurs via a singet electron transfer rather than a radical mechanism.