I don't think the art looks bad. They are working from the original sprites, so most of the badness was there in the first place. You can just actually see it now.
It comes with the territory of what they are doing. For what it's worth, I don't think anything looks that bad. For example, in motion, you won't notice that fist thing. Things like the awkwardness of that Guile kick pose, that was ALWAYS there, and I am surprised you are just noticing it now.
Game looks fine.