First of all, it's worth nothing that nobody can say what "would" happen when two teams play. What would happen if the 2011-12 Missouri Tigers played the 2011-12 Norfolk State Spartans? The Tigers would win on average by around 20. They'd win occasionally by 30-40. Sometimes they'd win a close one. On really rare occasions they'd lose 86-84. So if you're not willing to admit that it's possible for either the 2012 or 1992 team to win a game quite handily, you're in denial of the uncertainty of sports. There are very few things in sports that "can't" happen.
Of course, the real reason that a generational debate is stupid is because it isn't defined. To me, there are two very different ways to ask that question. You can ask what would happen if we built a time machine and went back in history Bill & Ted style (kids, ask your parents), and dragged the 1992 Dream Team to the present day. You can then ask which team would be better. Alternatively, you could ask what would happen if everybody on the Dream Team was born 20 years later, and had the same parents, environment and experience. These are two very different scenarios.
Let me be clear that I loved that 1992 Dream Team. I grew up rooting for those players, and I'd root for them against the 2012 ensemble. But the fact is that if you dragged the 1992 team Bill & Ted style into the present, they'd lose way more often than they'd win. The level of athleticism that players have today is just so far and away above what existed 20 years ago, it's almost a different sport. When Magic Johnson says that only Kobe and Lebron would definitely make the 1992 team, he's being an idiot. A player like Kevin Durant simply didn't exist back then. A guy who is 6'11" and has arms that nearly stretch across the court who can move like a shooting guard? That guy wouldn't make the team over Chris Mullin? Really?? Back in the early-to-mid 1990s, anybody who was over 6'10" was slow and plodding and played in the post. Players like Durant, Dirk Nowitzki and Kevin Garnett hadn't been invented yet.
But this is true for all sports. The world's fastest track athletes in the 1950s would struggle to make a good high school team in 2012. The same goes for the fact that guys like Babe Ruth and Ty Cobb, who destroyed baseball in the early part of the 20th century, would be blown off the plate by a modern closer throwing a 98 mph pitch with movement. This effect is even more true in basketball, which is a relatively newer sport. Look at these highlights from the 1966 Eastern Conference Semifinals (only 6 NBA teams made the playoff back then, and the Celtics team shown here ended up winning the title):
You really think any of those guys other than Bill Russell and maybe Oscar Robertson could even make a good Division I basketball team if we brought them to 2012 in a time machine? Or even better, watch this footage from the 1940 NCAA Championship game and tell me whether this looks better than a typical pickup game in most college gyms nowadays:
Let me be clear that I'm not arguing that the 1992 Dream Team looked like 1966 NBA teams or 1940 NCAA teams. But it's evolutionary process - it wasn't like we all woke up one day in 1975 or 1985 or 1995 and the entire NBA had suddenly gotten as athletic as it is in 2012.
The fact is that human evolution isn't that fast. We haven't biologically evolved in any significant way in 60 years. What's changed are training habits, eating habits, workout habits, et cetera. The top athletes in the world in the 1950s would spend their offseason working another job, often going weeks without working out in any way. They'd smoke, they'd eat badly, and they wouldn't lift weights. No wonder they didn't have any Lebron James or Kevin Durant-type players. Bob Cousy is considered one of the greatest point guards of all time, yet he couldn't dribble well with his off hand, something that is a requirement to start for any high school team today. But a Bob Cousy born today would learn to dribble properly. A Ty Cobb born today would use that tremendous intensity and competitiveness, which combined with modern training methods would create a really good baseball player today, and a much better player than 1910 Ty Cobb. Imagine what a modern personal trainer could do with late-1980s Charles Barkley. And imagine what modern medicine would do for Patrick Ewing's knees, or Larry Bird's back.
Sometimes writers will pay lip service to this by comparing teams to their competition - the 68 point win the US had over Angola to open the 1992 Olympics is often cited here. But even this is flawed. The depth of international basketball in 1992 was brutally poor. In 2012, every team in the Olympics has at least a couple NBA quality players. Barring a few injuries, France could have fielded a team with 12 NBA players, and even then would still not have been considered one of the top two contenders to Team USA. In 1992 the only team with a significant NBA presence was Croatia, which featured three NBA players. They held the Dream Team to a reasonably close 32-point margin (it was only a 14 point game at halftime). That team would have been even better if Yugoslavia hadn't broken up (a unified Yugoslavian team would have included all of those Croatian players as well as Serbians like Vlade Divac and Predrag Danilovic). Let's recall that the 2012 US team will be favored by 15-20 points over their top opponents (Spain and Argentina), both of whom would likely have utterly destroyed any non-US team from 1992.
And in general, all sports are much deeper athletically today. We have many more athletes who get proper training methods, who are spotted by scouts, who specialize and work out at younger ages. Babe Ruth was hitting more home runs than several entire baseball teams in the late 1920s - it's simply impossible for a player to be that much better than the rest of the competition nowadays.
So stats guys can apply all the objective metrics that they want, but it's an exercise in futility. It can be fun to compare teams from different eras, but trying to apply any sort of rigor to the analysis is always going to be silly and pointless.