As our title character and the focus of the story, Teddy is our clear choice for protagonist. He's not a typical protagonist, however, for a few key reasons. First, we can't necessarily relate to Teddy. Unless you've studied eastern philosophy extensively, subscribe to its basic tenets, renounce materialism and pleasure completely, have seen God, and remember your previous lifetimes, you probably find Teddy a little out of the ordinary.
There's also the issue of Teddy's static nature. He doesn't seem to change, learn, or grow much in the course of the story. He's committed to accepting his death in the beginning; he does in fact accept his death at the end. He teaches Nicholson, but he doesn't learn anything from Nicholson. He doesn't overcome any daunting barriers in the course of the narrative either; it seems that Teddy has already fought (and won) those battles in previous lifetimes, or before the story began. This is unusual for a protagonist, who is generally a dynamic and sympathetic character.