After running through a 4x4 matrix, I figured that blue/blue was the best overall. Nothing can outdamage you unless it's by x/green armor, which then gets owned by everyone with a green/x so everyone else starts playing green/green and ties, until eventually some smart guy swaps to green/blue. Thus, you laugh for a while as everyone else follows and lose to your original blue/blue, starting the cycle again.
Matrix + human psychology for laughs [and wins?]
Personally, I'm caught between how awesome the green sword looks and the style of going blue/blue [plus blue/blue deals with everyone else's odd choice of yellow/yellow]. And I'm sure others probably know how to work the dominance form better e.g. Gambit or rosyatrandom.
I haven't checked your math, but you have the psychology right for MMOs. Basically, figure out what the Flavor of the Month is, and then play what counters it.
See Dave Sirlin's discussions of yomi layer 3 and rock, paper, scissors.
...Yomi is the Japanese word reading, as in reading the mind of the opponent. If you can condition your enemy to act in a certain way, you can then use his own instincts against him (a concept from the martial art of Judo). Paramount in the design of competitive games is the guarantee to the player that if he knows what his enemy
Note: this image does not belong to me; I found it on 4chan. It presents an interesting exercise, though, so I'm posting it here for the enjoyment of the Less Wrong community.
For the sake of this thought experiment, assume that all characters have the same amount of HP, which is sufficiently large that random effects can be treated as being equal to their expected values. There are no NPC monsters, critical hits, or other mechanics; gameplay consists of two PCs getting into a duel, and fighting until one or the other loses. The winner is fully healed afterwards.
Which sword and armor combination do you choose, and why?