If the Neo Geo looked awful, it was because your tv's scaling chip was murdering the picture. Fire up something like Shock Troopers off PSN on the PS3 and the picture is going to be beautiful.
Plenty of people love classic gaming. The thousands of sites around the internet, long established hobbyist emulation on a variety of platforms, people developing new products for classic systems, and the thousands of classic gaming compilations, rereleases, and digital downloads should all attest that the popularity is there.
But this streaming service will never take off. Sony will let it wither on the vine and most consumers will end up turned off by less than desirable quality. Their efforts would've been much better spent towards emulation. The money they threw away buying this company would've likely provided the PS4 with full compatibility with Sony's past three consoles (and with downloads for both handhelds) with a large chunk of change to spare.