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I certainly agree with you that in both baseball and basketball the overall athleticism and physical talent is leaps and bounds better than what it was even 20 years ago (not to mention 80), but my contention is that as these spots (players, coaches, gms, the whole industry) has concentrated more and more on style over substance, on brawn and size and speed and bench press reps and 40 times over boxing out, the ability to read the spin and distance of a shot to position your self for the long (or short) rebound, the ability to put bat on ball, the ability to foul off good pitches in order to get the one you can handle, the mental fortitude to go through slumps and the long grind of a season, the skill to feather in a (Doug Fister) fastball to all four corners over muscling up to 98 (Morrow) but having no idea where it is going, etc, etc, etc.  That all of that added stature, athleticism, and Physical talent really hasn't gotten us all that far!
Wilt, Bill Russel, Magic, Bird, Jordan, all those guys would still be dominant today, and even some of the lesser stars, guys like (to use a NW example) Kiki Vandeweghe, Barkley (a great example of hard work and basketball skills over a hard body and phyical prowess), Lucas, Baylor, Petit, Cousy, they would probably all still be starters today on good teams.  The list could go on and on.  Yeah the scrubs back then couldn't jump as high as the scrubs now... SO?  I bet they were still just as good at the game of basketball.
Would Babe Ruth start in today's MLB?  I sure would take him on the M's right now!  Would Hoyt and Pinnock be able to get MLB hitters out?  I bet they could throw quality starts against these M's, but how about say the Cardinals MOTO?  Maybe not.  I am not sure how fast those guys threw, but Moyer shows us that this game is not all about MPH. 
I am sure you are correct that today's MLB as a whole would beat the 1927 MLB, but probably not to a bloddy pulp.  And specifically the '27 Yanks vs. the '10 M's?  Seattle lost before it even got to the field because they are mentally broken right now, but even if they played before the season the Yanks would clean up!