Fedorov, better defensively and no worse offensively.
I agree that Fedorov was better defensively, but there's a clear gap in offensive production.
Sakic outscored Fedorov by 11 points, and he did it in a much lower scoring season. (If you're just going by leaguewide GPG, 1996 was about 14% higher scoring, and Sakic outscored him by 10%, so that's a 25% advantage on a relative basis). 96 points was enough for 3rd place in 2001; that only would have ranked a player 17th in 1996. There was a huge change in the scoring environment, even though these were only five years apart. Also, Sakic led his team in scoring by a wider margin (29 pts vs 12 pts).
This isn't directed at you specifically, but I find it amusing that, in other recent threads, people have been arguing for Fedorov's 1994 season on the strength of his two-way play and goal-scoring ability. Yet in this comparison, Sakic was by far the better goal-scorer (54 vs 39 - in a lower scoring environment) and nobody has mentioned that. People seem to be picking and choosing whether to emphasize goal-scoring, depending on how that makes Fedorov look.
Ultimately, there's a good argument for either player. I'm not sure that Fedorov ranking one position higher for the Selke (1st vs 2nd) is worth a 25% difference in production (on a relative basis). One would have to argue that Sakic was significantly overrated in Selke voting in order for Fedorov to come out ahead here.
(EDIT - I looked at the database and Fedorov had a 70.9% ES GF% in 1996, and the Red Wings were 57.9% when he was off the ice. In 2001, Sakic had a 69.0% ES GF%, and the Avalanche were 52.6% when he was off the ice. If anything this suggests that Sakic played a bigger role in improving his team's ES results when he was on the ice. Fedorov had a bigger role on the penalty kill, but I'm not sure how many people are willing to trade 15 goals for one extra minute per game of PK time).