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It looks better...

however, I think subconsiously crappy sprites and crappy backgrounds look better, because it looks like every other SNES game so it's accepted in your brain for it to look that way.

Whereas when it's all cleaned up and made higher resolution, it doesn't really look like anything that you've seen before. And feels unnatural.
It feels new, and when compared to other 2D games like TWEWY or Rayman origins it looks craptastic still.