Yeah, in general people like to look at and play as attractive characters rather than unattractive ones. So I guess you could say that they make the game better, at least better than the alternative. It doesn't always have to be the case, but mostly yes.
There's this new narrative that says people want to see themselves in characters with all their flaws and ailments, but I don't think human nature works that way for the most part when it comes to entertainment. Most of us want to something to admire or to aspire to, it's about escapism after all.

I think people want more to make idealised versions of themselves. I know I do and from a thread I made before, most people on here agreed. 

In the absence of further context (art direction, character portrayal, non-narratove storytelling...), I really don't see any reason why making attractive characters would be a downside.

The playable character needs to be appealing in some way or another.

Pretty, handsome, sexy, cool, funny, adoring. A positive reaction is needed. If a character is unappealing in any way being bland, ugly or annoying, I will not be interested in playing the game.

Now what is appealing is subjective to an extend. Mostly game designers get it right to appeal to my taste. But certainly there are also times they got it very wrong and in these times I don't care how good gameplay might be, I still don't want to play the game.

Not necessarily, usually when there's a character creator I make my character look like a walking monstrosity. Like in souls games lol

Would gamer's play a game with an acne infested character? Or maybe a 20 stone obese character? I thought not, thanks for playing.

I guess, marginally. I definitely would rather stare at an attractive person for 60 hours over an unattractive person, but at some point the mechanics of the game take over and the avatar becomes part of the scenery anyway.

I would also point out that there's a spectrum at play here. Too ugly can be a turnoff, but too fetishized can be equally off-putting. I find excessive fan service in a game more distracting than a homely character.

There are some subjects (war, disaster, poverty) where brutal realism and with it realistic or even exaggeratedly ugly characters can enhance the experience.

But much more often games are about heroes and the general quality of heroes is that they are better than us normal people, also physically. Them being good looking is partly logical as they need to be athletic - even a plumber can't be too obese to jump around.
And everyone likes to look at pretty things, humans included. (With obvious exceptions, like horror etc.)

Another part of this conversation is that good looking/attractive is one thing and sexy/sexual another - though much of the latter is also the first, depending taste. Sexy can be distracting or distasteful or take away credibility.
So there's a (low) limit above which attractive is better and a slightly higher after which sexiness becomes a plus.

Yeah, it's easy to do this in Souls or Cyberpunk or games where you font see the character but do it in a 100+ hour RPG and you'll spend the majority of that time thinking, fuck I better restart the game.

I like how GTA SA and GTA6 will do it, you start off in GTA6 pretty idealised but solid rumor has it that like GTA SA you will get fat, anorexic and loose out on stats over the course of the game if you don't stay healthy. This solves all camps arguments apart from the one where making sexy characters takes recourses away from the game.