First off... was the Sheik better than Backlund? Despite being so similar in style... you really couldn't be talking about two more polar opposites. In a shoot fight? Well I'd have paid to see that in those guys primes. Those were both two guys you just didn't want to mess with.
As for the title reign making someone greater... the best being the champ... ect... the answer is no... with a but.
The champion isn't always the best in the company. Many times, the champion is just the guy that needs the title in order to get over... because he simply isn't a draw without it. Then there's other guys who never need a title because people will pay to see them no matter what. One guy that needed the title would be the Miz in 2009/2010. No one was going to buy a ticket just to see the Miz by himself, or buy him at the top of the card just on his own. But put the belt on him, and you can book him stronger and people will get it. A guy that never needed a title was Jake Roberts. He'd wear regional titles in his territory days, but once he went national with the WWF, he was never a champion... yet he was one of the biggest draws they had for years.
The 'but' comes in when you see what guys do with their reigns when they get a shot. Now a lot of that has to do with booking, and there is only so much anyone can do when they're saddled with bad booking. Sting is probably one of the best examples of this. He's worked at the top of the card for a quarter of a century. He's a multi time champion. But actually go back and look at some of his title reigns, and tell me how memorable they were. He's a great talent (a little lazy, but can compensate for that by being such a great talent), and he was always booked as a strong challenger... but as champ he seemed stagnant. It was almost as if the bookers just felt that his popularity would carry his title reigns, and they took their foot off the gas for him as soon as the title was around his waist. He still manages though, to make each of those reigns better than they should have been on the back of who he was.
A guy like Foley on the other hand, only ever got a taste of being champ... but man did he make the most of that taste. He had a great story though, which he had written with his own work over the years, and he conveyed that story to the public better than anyone else could have. The guy conveyed it so well, that him winning the title was the turning point in the Monday Night Wars, because as soon as Shiavone (sp) told the Nitro audience that Mankind was winning the WWF belt, everyone turned the channel to see it.
You can look at Foley's first title reign (a transitional reign like countless other ones), and argue that it was more memorable than Stings first title reign as the standardbearer for his company. Does that make Foley better than Sting? Not in and of itself... but it does show how much booking plays a part in the quality of a reign... the rest of course being how well the champion carries out the booking.
So in closing I guess... no a title reign doesn't make someone the best. There's just far too many variables to look at it so black and white.