Sagat has always been one of those characters who was very, very powerful on the look out, however once you figure out his ways and learn to really play footises and bait him to get punishes in, things start to drastically change.
In SFII:CE, his Tiger Shots were ridiculously good, and gave him tremendous priority over so many characters, however once you learned how to get around him, he isn't as intimidating as he once was. Samething in HF, Super and yes, even ST.
The problem is that, alot of people today no longer can achieve this level of positioning and footsies, and more importantly it's a lost art that has been watered down through out the years.
You go back, and you'll see tons of Ryu's, and good Guile's giving Sagat one hell of a problem. The notion in SF:IV with Sagat is pretty much the samething, the guy is very dominating however some characters can fight him very well, Gouki and Ryu come to mind.
Ryu can fight Sagat very well, the only thing Sagat does better then Ryu at is zoning with projectiles and raw damage. However Ryu beats him out at everything else. Sagat also has alot of problems with Gouki as well, due to his zoning capabilities and the fact that Gouki can really capitalize on Sagat's slow speed and size, the same with Ryu as well.
When you look deeper into it all, and if you simply just "compare" the Top-3, this meaning Sagat, Ryu, and Gouki. Sagat actually doesn't do as well, he goes "even" with Ryu, and arguably loses "slightly" to Gouki. While Ryu goes even with Sagat and Gouki, and for Gouki he wins slightly against Sagat and is even with Ryu.
So at the highest levels of play, Ryu and Gouki actually become better characters then Sagat, because up against the best, they don't lose out at all. Ryu when played correctly has almost no weaknesses to his strategical set up, it's been shown time and time again, and noting the fact that he has the most retarded brain dead easy Ultra Set Up just makes it all the more to his advantage, even against those so called "5-5" match ups which imo are more in Ryu's favor.
Gouki is like Ryu, however he does have a disadvantage in that his Ultra is more difficult to land, and if he eats an Ultra set up he's in for a world of hurt, however that doesn't negate his dominant zoning and offensive prowess whatsoever.
So for me, personally, when played right, I believe Ryu and Gouki are the best characters in the game of SF:IV. However, Sagat just really beats the pants out of much of the cast which is why he gets the "nod". I feel Sagat is much like his older SFII counterparts, like in CE, HF, etc, etc. In some of those matches in those games, he beats out characters badly, in contrast to say Ryu, however when played at their potential, Ryu becomes a much better and more effective character due to his lack of weaknesses and how he dominates to win.
On other news, I heard that in Super Street Fighter IV, they gave Ryu a Two-Hit Shoryuken now, and he still has all of his Ultra Setups...which again, makes me laugh at Capcom. Honestly, as the way "things" are looking, Ryu actually looks to becoming the #1 best overall character in Super Street Fighter IV, obviously all theory talk at this point. However he looks to me at least, to be the character with the least significant nerfs while all the other characters whom were good got some pretty beefy ones, Sagat and Gouki for example.
At this point, if the new characters don't turn out to be too overpowered, Ryu's looking to be in the Top-3 again, if not, #1 spot.