If that was the case, why would they sell retro titles in compilations such as Midway Classics, or even have downloadable titles from years gone by, like they have on the Wii's Shopping Channel?
I know why, because they SELL... No fancy graphics, they relied on good old time gameplay, which I presume, people miss!
Yes, this is true, but there's a distinct difference between these games and a new game. As I said earlier, if people don't like the graphics, they don't download the game. That is, of course, a gross oversimplification, but in order to sell a downloadable game you ( usually ) have to achieve two things.
1) Get them to download it.
2) Get them to buy it.
To achieve 2, you have to achieve 1 ( keeping in mind the usually I already inserted above. ) If they've already played the game, they don't need to know if they like it. They already know. So they can safely bypass this stage, even if it's only because they're blinded by fond memories for a game they're unlikely to find as enjoyable a second time around.
That won't work on a new game. Unless you're going to license an existing property and remake it, people aren't going to know anything about your game until they see it and play it. So you've got to make them download it, where the retro remake does not have this burden. If they decide it doesn't look very nice - a bit rough around the edges - and decide not to try it, they'll never know that you had good old time gameplay.