It doesn’t look like a hardware issue. Yes, the less powerful hardware is what forced graphical changes, but it looks like an art direction problem.
The changes mostly fail to capture the essence of the original design. The characters look like they were ripped from the SIMs.
No one is expecting the same lighting, textures, or poly counts, but they do expect something that looks like Mortal Combat. That isn’t an unreasonable expectation.
You’re right that this may be a budgeting issue of sorts, but if they can’t set aside enough resources to make it look like some sort of Mortal Combat game, then maybe they shouldn’t have made the port.