Again, being ranked #1 is completely meaningless. Caroline Wozniacki has been ranked #1. Dinara Safina has been ranked #1. Ana ivanovic has been ranked #1. I believe Azarenka is a more worthy #1 than many recent #1s (something I stated explicitly earlier in the thread), but this match was close because Serena started missing her shots. Azarenka applied more pressure than most (again, something I stated earlier in the thread), but there's a reason she is 1-9 against Serena. She doesn't have the weapons to stand up to her. It's not even a contrast of styles where Azarenka wins with guile and Serena with power. Azarenka can outhit most opponents. Not Serena.
This is NOT a competitive field. The women's draw is weaker than it's been in years. Parity does not mean competitive. It can just mean no one is historically great. When the field was more competitive, Serena did not dominate. A lot of it has to do with injuries and focus on stuff other than tennis, but you can't ignore that from 2004-2008, she won only five majors. No one said 15 majors wasn't impressive. Of course it is. But Steffi and Martina were more dominant in their eras than Serena has been in hers. Serena has a chance to change that over the next few years of her body holds up (and for the record I think she will), but she's not there yet. Her best tennis is better than anyone who has ever played. Her worst tennis is below some of the other all-time greats, and she plays it with somewhat greater frequency. This has to be noted when considering who the best ever is, as is her relative weakness on clay (by contrast, Steffi didn't care for clay either relative to grass and hardcourt and still won the French Open six times).
Saying Martina's game wouldn't hold up to Serena makes little sense. No one serves and volleys anymore. There's no reason to because you can generate power and sharp angles from the baseline (which is a safer place to be). Throw Martina into the modern game, and she would have challenges as a serve and volleyer. Give Serena a wooden racket and catgut strings, and she'd be challenged to beat Martina. Give both of them the same equipment and access o the same training and let them play a year later, and who knows what would happen. Serena would still have more power, but Martina would have a better sense of how to construct a point and have more secondary plans if her Plan A wasn't working. I actually think it'd be a fascinating match.
Lots of good points made here on several interesting aspects of the women's game in recent years. I have a couple of thoughts:
1. While Serena's serve has always been very good, and more fundamentally sound than her sister's, it has not always been universally regarded as the best in the women's game, even if you took Venus out of the equation. Likewise, Serena has always been a power player but recently she has dialed up the power
even more, to a quite amazing level, as a function of more confidence and a more attacking mindset. As Errani mentioned after their semi-final match, there are lower-level pros on the men's side that do not hit as hard as Serena. My point is that while Serena's style is much the same as it was in 2004-2008--she was a hard hitter and great server then, too--she is playing at a different level now, IMHO. If you took the 2012 Serena and put her back in 2004-2008, I think she would have a couple more majors in that time.
2. I agree that the parity does not equal quality. To me, this manifests itself more in the semis and finals. However, in tennis as in any other game (golf for example) everyone can have an off day, and I think there are more young baseline-bashers now than ever who can ruin your day and send you packing in the early rounds if you're playing badly. If you, as a great player, make it to the semis/finals as expected, then yes, there are fewer champions out there roaming around. But being great today requires a little higher level tennis and consistency to make it safely to the end than it used to. I was more shocked back in the day when Martina or Steffi didn't make it to the semi or final than I am if Serena or anyone else today has a hiccup early on.
3. Martina/Serena. In general, I would give this one to Serena 2012 because of Serena's stellar return game. HOWEVER, we so seldom see any serve and volleyers in the women's game anymore that we forget how pressure can affect the returner. Serena always appears calm but she has said that she is usually a cauldron of nerves inside, and we see this in tight moments sometimes, especially when she is not hitting her spots. A server/volleyer of Martina's caliber might well cause even Serena's return game to develop some tightness. As I said, I still think Serena's return game would win the day, but I would not just assume her usual return game against Martina. MN was the GOAT in serve/volley on the women's side, and this match would be interesting. I completely agree with your Plan A / Plan B analysis of a MN/SW match as well. Martina had a much better 'feel' game and could improvise better as well as manufacture a wide variety of shots from midcourt, in "no-man's land." (This is not Serena's strength of course, and overall she has fewer dimensions to her game.) Serena has great speed which can help negate those kinds of shots sometimes, but Steffi was even faster and Martina still had great points against her in their matches.