The Scarecrow didn't outshine the Joker because he was so good. It was because Joker was badly used and over done. He was in your face in nearly every scene in the game. It actually got annoying many times because he'd be there in the background talking over other characters that you're interacting with. He butted into all the key moments with other characters. From telling Gordon Barbara's been abducted, to Jason's reveal, to even the finale which they turned into a Joker centric one. He's the demon you have to beat, not Scarecrow. He's the only part of the finale that allows the player to actually do something, even though it's not even a challenge. This game featured him more than any of the previous games did, and the irony is he was dead this time. Fans were actually looking forward to a game where Joker wouldn't be a focus. They way overdid his presence in the game, to the point that it hurt it. Joker had a bigger role in this game than Scarecrow, but the difference is Scarecrow was quality. Quality over quantity.
Scarecrow had no real quality villains to compete with. They were all either very under used, boring, or annoying. Sad to say that as a Joker fan, but it's true. That's why it's not so impressive to say Scarecrow was the best villain who wasn't outshone. He had no real competition.
I actually thought Joker was really brilliantly done. I mean grant it, I am a bit Joker out in these games and was hoping for more of an end boss cameo from Joker then what we got.
But what we got was really genius. I mean I grew up with Hamill as Joker. I grew up on BTAS and the movies and JL he was Joker in and all the stuff and really Joker in this game IMO rivals Batman Beyond Return of the Joker. This was one of the best takes on Joker since TDK but even then in all Batman media. I love how they integrated stuff like Killing Joke and Jason Todd's "death" into the Joker flashbacks was really well done. I loved how he really was basically a troll. A demon to Batman. He called Batman out on his ******** numerous of times which was great to see. Involving Joker in this way gave this game such a psychological twist that felt different from previous games. Joker really pushed Batman mentally into trying to prove Batman would kill given the chance. Scenes like when Batman had the gun with all the Jokers around and also the scene in Crime Alley was just handled so well. Also playing as Joker in witnessing Batman's worst fear then playing as Joker in his own worst fear was really well done by Rocksteady. I really feel that the sort of final level they did was better than any generic boss battle. Though wish we got a Scarecrow boss battle like we did in the Batmobile missions.
It's funny since at first I though "Batman turning in Joker doesn't make any sense" only because we saw Batman cure himself in City but when thinking about it, he cured Joker's blood in City. He still has Joker's blood in him just it's cure free now. Basically they are doing Batman Beyond Return of the Joker but instead of a microchip (which let's be honest, how the hell would Joker figure out how to implant a microchip into a 13 year old's brain) it was his blood.
I was completely burned out with Joker before the game. I love AA and AC but even when I played Origins I felt that Baker's Joker and WB Games Montreal's Joker was better than Hamill's Joker in the Arkham series. While I didn't like how it came at the cost of making Black Mask, who we thought was the main villain of Origins, he was just done so well. Then of course AK came out and I just loved how Joker was used in this game. Having him as this demon who keeps pushing Batman and calling him out on his ******** was great.
When it comes to Scarecrow I do agree that besides Joker, the game is lacking villains. I mean no one is bad. Some are great like Pyg, Man-Bat, Penguin (really love the Arkhamverse Penguin) while some are just meh (Deathstroke, Two-Face, Hush).
But I do feel when it comes to the Arkham series, the 5 best villains in no particular order are:
Joker (Arkham Knight)
Scarecrow (Arkham Knight)
Bane (Arkham Origins)
Mr. Freeze (Arkham City)
Deathstroke (Arkham Origins)