Sorry, but I disagree. I saw a couple games of that series on ESPN Classic back in the day, and the Kings played better hockey in stretches. The "non-call" in a 7th game is no excuse for not burying your chances in previous games. They had their chances and could not convert.
That's circular logic. As someone else already pointed out, you're just defining "better" as the team who wins.
Overtime in game 7. Obviously it's been a close series and both teams have capitalized on some opportunities, and failed to capitalize on others. Team A scores but the goal is mistakenly waived off. Team B takes advantage and scores to win the series. Which team would be better?
No amount of luck or reffing can completely take the players out of the equation, but there are factors in every series besides the players that do have an effect on the outcome. Most playoff matchups, especially after the 1st round, pit two teams fairly close in ability. A little more luck to one side can be enough to tip the balance from "slightly worse" to "slightly better", and thus change the outcome of a series.
Also, it is impossible to say how a series might change if any particular event were different. A bad call that leads to a PP goal and a victory in game one may very well change the winner of a series, or it might have made no difference at all. Unless you explicitly define the parameters for what "better" means, you can't actually claim that the better team always wins. It seems you just want to define it a whichever team wins 4 games.
I'll say that the team that capitilizes on a greater number of opportunities will almost always win a 7 game series. That may or may not be the "better" team, but who really cares. Trophies go to winners, not betters.