I don't know about anyone else, but I've always liked Earthbound's graphics and art direction, ever since the first time I played it when I was 8. I wasn't aware of anyone thinking the game looked bad, I just saw a fun game about psychic kids beating up goons and monsters, and that it was an RPG which I enjoyed playing. At the time I still played a lot of NES games, and Earthbound had a lot bigger and cleaner sprites, with a lot of fun, whimsical stylings. It didn't have the super-detailed spritework of FF4 or FF6, but I would have never described the graphics as bad, even back then.
I do specifically remember being wowed by FF7's graphics, though. They were a big leap forward at the time, and stuff like that was totally engrossing on its own level. But I mean, the exact same thing can be said about Atari-era games, and they have a lot of the same problems with graphics and style that early PS1 games do. The problem is that I don't have many -other- memories of playing that game, I just remember saying "wow that looks cool" a lot.
Looking back on both games from my current vantage point, I can obviously see why I still enjoy a good round of PSI-ROCKIN OMEGA and can't stand shuffling Materia around.