First the official warning, do not give the Azura's star artefact to Martin. It makes recharging a magical weapon far easier, you will probably need it later in the game.
Aw, give Martin the thing he asked for. The survival of the empire is more important than a refillable soul gem... :wink_smile:
Seriously, if one is
roleplaying, this is one of those game decisions that depend on the character you're playing. Just because I know that Azura's Star is too valuable
in the future to give up now, it doesn't mean that my character knows it. For me, there has to be a good justification for my character both realizing the significance of that artifact, and knowing that there is an alternative.
For most of my play-throughs, I have had some reason for a character to be exploring on the road between Bravil and Leyawiin at a point prior to that part of the main quest, and to have thus discovered the Shrine of Sheogorath. That reason could be guild-related travel, or it could be that a character is doing the wayshrine pilgrimage (there is a wayshrine very close to the Shrine of Sheogorath.)
One of my characters, a dunmer from Morrowind who worshipped Azura, was vehemently opposed to dealing with any other Daedric lords, and considered Azura's gift to be the only fitting sacrifice to the task of saving Tamriel. It's a game-changing decision, of course, but that's what makes this interesting. There are hundreds of ways to play the game.
But yes, from a purely game-playing point of view, Azura's Star is too valuable to give to Martin.