Sten is a damage MACHINE. If you give him the right combination of talents, skills and tactics, Alistair will never be able to beat him for raw damage-dealing potential.
However, Sten doesn't get the armor (and sometimes magical) bonus from carrying a shield, and there are a very limited number of truly AWESOME two-handed weapons in the game. Good one-handed weapons seem to be much more common (of course, the top-tier two-handed weapons that DO exist are pretty darned amazing). When it comes to tanking and soaking damage, a well-leveled Alistair will beat a well-leveled Sten every time.
Personally, I picked Alistair because he is a lot more interesting as a character, and has amusing random dialogue with nearly every other party member. Plus if you give him Shield Wall, he is as close to invincible as this game will let a character be. With a healer like Wynne in the party, he can tank enemies like no other, and his damage is nothing to sneeze at.