"On an aside, I still find it amazing (and often inspirational) how, despite the appalling graphics, so many of these games were fantastic fun to play."
Mr.Miamoto from Nintendo went down the path of "cell shaded graphics" during the life of the GameCube because he argued that having a lot of textures etc on a game distracted the user from the actual game play. This made total sense to me at the time, as I was still in secondary school when I got my GameCube and there were constant arguments about which game looked better. I think one such game was BMX XXX - but the only reason that was a good game graphically was all down to the computer generated pornography that made the game what it was.
The other thing though is that consoles and PC's these days are stupidly quick, so the programmer can do a hell of a lot more now than they could when making a game for the C64 for example. The problem with this though is that laziness creeps in. With a C64 you had to cut down your music files to something like 1k, and the resources of the systems were extremely limited. So you begged, borrowed and stole resources on the machine where you could. Whereas these days the games developer will create something that isn't really optimised for the machine it's meant to be running on. Over reliance on first day patches are the obvious symptom of this culture now. Obviously games back in the day still shipped with bugs, but these were largely small bugs, not massive game breaking issues - I know there are exceptions to this rule, but for the most part it's true. These days you can't play the game until you apply the patch. I bought Wolfenstein: The New Order on the day of release and the first thing it made me do was download and install a 15GB patch for the game. 15GB?!?! How broken was that game on release?!?