I think i may have figured out the disconnect on balancing the holy avenger. It isnt just an issue of being powerful enough to be worth a legendary, it needs to spark a 'WANT!' reaction from paladin players.
Last year, all three legendaries gave me that feeling. This year:
Barbarian with 2H focus wants new item, more damage, more rage, new fury. RAR!
Monk has damage, stun ability, ranged fists, and nice nod to strong mind.
Ranged ranger gets a big damage boost and animal companion is just cool...and some CON to keep up power to compare.
Then paladin...well, this is definitely better than other legendary weapons for paladin. You give up a little damage but gain the cool grace power. That is totally worth it. BUT, for those who dont regularly make legendary items, the holy avenger doesnt have the same enticement as the other class legendaries. Sure, if a person decided to make a legendary weapon for a paladin, they choose this. But if they are just equipping a paladin without unlimited funds, the holy avenger doesnt scream 'must have'. If +guard were all the time, it would be a must have item...even at the cost of removing bonus lay on hands.