Either way, Sabin whithstood an attack they could not.
And later, Terra withstands an attack that Sabin very often doesn't withstand. And I could say exactly the same about his lack of participation in the fight after that point - assuming the attack isn't so powerful that he's blown clear beyond where he could participate in it again, he says "Ah, Terra's got this". So, again, the argument you're making could easily be thrown back on Sabin.
Alright, fine, lets keep playing mechanics game. Merit Award, Ultima weapon, Hermes Sandles (Depending on which version you are playing. Sabin has superior Speed, HP, and strength. He will hit first, and even if it's not enough to kill Terra, no way will her Ultima weapon be doing enough damage to still kill Sabin (Who, mind you, due to his Vigor/strength can hit for Max damage with Ultima weapon before Terra). And even if you say Terra can make up for that with Esper bonus's, Sabin is growing his stats too. No way will she land the first hit.
There is an easy way she will land the first hit, since their speed stats are only four points different to begin with, and that is a trivially easy stat to make up, especially since Terra is likely to be in the party for a lot of the more advanced areas of the game after the party gains the Odin esper, where her ability to multi-cast powerful spells will make her a valuable asset. Let's keep in mind that Sabin's biggest strength in his natural form is Blitz, which caps out at 9999 damage (although he does have some Blitzes that target multiple enemies, but against enemies that are immune to fire and wind damage, these are useless); Terra, by contrast, can multi-cast chains of spells that can wipe out enemies with more than 9999 HP with ease, and simply Osmose magic when she runs out. Obviously Sabin can do this too but his natural magic power is 11 points below Terra's, so he has a lot of ground to make up. Which isn't to say it's worthless to raise his magic power, since most of his Blitzes are dependent upon his magic power, but the player is bound to be raising Terra's magic power too.
Obviously if you want to throw Merit Award on to gimp the balance of the fight then that's going to throw the fight in Sabin's direction, but I don't know why anyone would waste a relic slot with one of those when they could Genji+Offering the most powerful weapons on one character to get the most use out of them. It's pretty obvious that when playing to the characters' own innate strengths Terra has a very realistic shot of winning, and by the time you can get the Offering Terra will be hitting for close enough to max damage with Ultima Weapon+Genji that it won't be worth wasting a relic slot with Merit Award on another character, unless you're running a low-level game.
Further, Terra
can easily hit for peak damage with simple attacks earlier than Sabin,
if she is morphed. If you're going to throw that many advantages to Sabin while disregarding Terra's obvious strengths, that makes it pretty obvious that you're trying to throw the fight towards Sabin.
The game never intends for you to gimp yourself to go into a fight. Yes, Punbaba is shown to be strong, but just strong enough that he can in fact beat your party, though the first fight sets up your party can in fact win. Were the fight intended to be just Terra Vs. Punbaba, they could have done the same thing they did with Vargas and have everyone blown away. They made the conscious choice not too.
That scene was to show Terra regaining the will to fight, and come in to help the party win, not solo Humbaba.
Regardless, it's also clearly intended to show how much stronger Humbaba is than the other party members, and the fact that Terra can't get blown away is pretty clearly intended to show her increased strength at her peak form (which she cannot reach until this fight - she gains the ability to Morph far more frequently after this fight).
Couple other things that occurred to me: Cosmos has the ability to draw any champion from the FFVI universe she wants to. Guess which one she chooses? Also, Dissidia strikes me as pretty much the FF universe's equivalent of a cage match, and Terra pretty obviously fares quite well for herself.
Not that I've actually played it, and I hear Terra is horribly OOC for a large portion of it, but regardless, I think it does reveal quite a bit about what the FF writers think of the strengths of their own characters.