Perhaps the point should be that we lost sense for a particular aesthetic during the transition to 3d graphics techniques.
I think this mirrors the transition from painting to photography over a century ago. As photography grew to dominate everyday images, painters had to go in a different direction to distinguish themselves. It's no coincidence that art became more and more abstract as photography grew.
There's probably a certain amount of truth to that. It seems like those animations sit in some kind of sweet spot between 'realism', 'beauty' and 'being visibly pixellated'. Since pixellation seems to mostly be used for the nostalgia factor as opposed to either realism or beauty such animations really must be a niche interest
I don't think that's true. While physics for clothing have gotten a lot better, it's a lot of visual flash that seem easier to work like scarves, coat tails, pieces that hang down, etc. I can't recall seeing the kind of bounce that those old school pixel art pants have. Those Aladdin/MC Hammer pants have a weight and shape that I imagine is still really difficult to replicate well. But maybe I just haven't seen such an example yet.
In the few recent fighting games I can think of, Tekken 7 and Mortal Kombat 11, even with relatively light use of physics based fabrics I still see a lot of wonky movement/fabric clipping and getting stuck inside bodies. I definitely don’t think we’re quite there yet.
Consumer hardware probably isn't fast enough to have that level of natural movement and detailed lighting in real time for physics-based clothing. So I agree that the claim is true.
Of course, the animated clothing in those pants wasn't from a physics engine. I'm sure similar results can be accomplished in 3D if they're not phsyics-based.