Nah, that wasn't peak Fed.
Federer had a blister on his toe which rarely gets mentioned. His movement towards the latter stages of the match falls off a bit. Commentators mention it multiple times during the match. Safin's own coach, Lundgren (Fed's former coach), said Fed's level was dropping off because of his foot injury. Fed also required treatment on his back and elbow before the 5th. I don't think it affected him a significant amount as some of the shot making in the 5th was amazing but I absolutely do believe it was a factor on certain points. In a tight match like that, those few points can be critical.
Also, Fed def blew opportunities in the match. He choked in the TB with two UEs on serve when he was up 5-2. He could've closed the match there. While I also have issue with the tweener he played, I think Safin wins that point anyway. There was also a bad call in the 5th when Safin was serving at 5 all 15-30. Safin's BH DTL was out which would've given Fed two BPs instead of 30-30. That's a pretty big difference. I also don't think Fed had his best serving day (8 DFs, one even on a BP in the 5th set which gave Safin the first break).
It's still a great performance by Safin. All areas of his game were zoning and I think he would've given Fed a tough battle either way (see 04 TMC SF for reference) but I think he loses that match 8 or 9 times out of 10 if replayed.
Yes, very good comment. Those things are usually overlooked when talking about this so-called "beating of peak Federer".
Because certainly it was during his peak ERA, but that doesn't mean it was a peak match or even peak tournament. His QF win over Agassi was impressive, but in the earlier rounds commentators talked about Federer not being in especially good form. Best examples were the Suzuki and Nieminen match.
And then there were those injury issues in the SF. Federer had a back tension that lead to a numb feeling in his right arm and also to pain in his foot after he tried to reduce the back issues by moving slightly differently.
You are also right about the missed opportunities. Actually the course of the Safin match was not much different from the Davydenko QF next year, only that Federer got over the finish line then, after almost choking the 4th set TB in the same way. Davydenko also had 6 set points in the 3rd set. He could have very well won that match.
All in all it seems like one loss outside clay during the 4 peak years just had to happen one day, and Safin simply was the one to be at the right place at the right time. As you said, of course he must have played a good match to achieve that, but nevertheless it was exaggerated to epic proportions as the years went by. In fact both Federer (72-59) and Safin (65-60) only had slightly more winners than unforced errors.
Also Safin himself missed a 5-2 lead and several match points in the 5th set (even though it should have been long over then). I have a feeling if it wouldn't have been the "cool" Safin, the usual suspects here would call that a massive choke.