OP, the real reason why Gypsy is called the greatest musical is because some critic said it once and it stuck.
But, why not? If some musical has to called the greatest, then Gypsy is a fine contender. It covers almost every sort of relationship there is - person versus society, parent versus child, romantic love, romantic loss, siblings, business, show business. It has jealousy, betrayal, triumph, hope, angry, sex, happiness, and sorrow. And, it is one of the few, and maybe the first(?) to cover a long span of time.
Plus, and I think this is another big part, it is a musical with strong women. Gay men are the biggest fans of musical theater and gay men enjoy strong women.
And, like others have said, it is timeless. When Gypsy is redone, it doesn’t feel like a stale period piece. It feels refreshing and new.
What other works could take the crown? South Pacific feels too old timey. Sound of Music is too goody two shoes. Company doesn’t have an actual plot. Sweeney Todd is too operatic. Hello Dolly is too one note. Chorus Line is too nitch. Fiddler too Jewish ( I am Jewish, just saying what the public may feel. Little Shop too camp. Phantom too camp. Les Mis is too epic.
And, I think that because the film wasn’t a high success, it helps keep the musical a “musical lovers” musical and thus respectable. If your favorite musical is Sound of Music, Funny Girl, My Fair Lady, Dream Girls, or something like that, musical fans will think you just like the film.
I think Gypsy would probably be even more loved if Sondheim would embrace it. He seems to have almost disowned it (it does get mentions in his memoirs at least) which is odd because it is his greatest work.