This was my opinion at the time as well. First generation 3D games looked inferior to the previous 2D pixel art and 2.5D shooters of the time. The polygon counts were just to low. They could handle perspectives better and had more complex lighting and by the second generation they were already the way forward, but they had a crude first effort feel and required additional hardware to really shine against their predecessors graphically.
I still feel a lot of games (particularly strategy games) lose something going 3D but maybe that is just nostalgia talking. I never could quite getting to 3D RTS games.
I worked at another game studio at the time of release and all our titles under production were 3D.
We played the hell out of it at LAN parties but felt that technically it already was dated.