Sure. As you say, some of Garry’s attempts at balance were more successful than others.
Right, you’re thinking of “balance” on an individual-to-individual basis. A Holy Avenger is more powerful than a normal sword, so they’re not “balanced against each other.” I’m talking about balance across the broader playing field. A Holy Avenger is able to be as powerful as it is and still feel “fair” because it’s extremely rare. If everyone could get one as easily as they can get a normal sword, normal swords would feel pointless. But, because normal swords are easily accessible and Holy Avengers are not, they each have a purpose and a role. The power is “balanced out” by the rarity, making for a fair overall gameplay experience.
My comparison to Magic: the Gathering was very intentional. Magic is a game where rarity as a form of balance is integral to the game’s design. Nobody is going to make the argument that a powerful rare card like Jace the Mindsculptor isn’t way stronger than a common card like Youthful Knight. But, in an environment where card availability is limited, the rarity of the former balances its relative power. Commons, though typically weaker than rarer cards, are more important in limited, because they form the majority of the card pool, and are the basis on which you’ll be building a deck. A rare bomb can be useful, but if you try and build around it, you’re likely to end up with a much weaker deck than one built from a solid base of commons.
Of course, this form of balance fails when access to the rarer cards isn’t actually limited. Richard Garfield severely under-estimated the amount of product the average player would open, and realized that in the long-term, rarity wouldn’t serve to balance the more powerful cards like he thought it would, because people would just buy enough packs to get whatever cards they wanted regardless of rarity (which is why limited formats were invented).
Likewise in D&D, players just re-roll until they get the stats they want, or use more generous stat-generation methods, or “cheat” or otherwise manipulate the intended probability distribution so they can play what they want to play. This undermines the balance factor I believe stat requirements were supposed to create, making the powerful classes, bonuses, and other advantages of high stats more accessible than they were intended to be. Which is pretty much your thesis. I think we’re ultimately in agreement here but quibbling over terminology.