Does it really matter? Let me tell you, no... no it doesn't.
Do you know why? Cuz my models still look good in either one. 
If I had the
intelligence to say that, I would of done, but you beat me to it.
What you say is absolutely right and its an arugment I have been trying to say in other threads.
Yes, MSTS is crap for the default graphics
Yes, Trainz is crap for the default graphics
Yes, Rail Simulator
is crrap for the default graphics..
(notice a pattern?

)
The thing is, all these programs feature
game engines that are
platforms to produce anything you want. It doesn't matter if its MSTS/KRS/AT, it doesn't matter about your graphics capabilities, it would look virtually the same in all other programs. What matters is the artist producing for that program and his/her capabilities of producing a
stunning piece or a
crap piece.
And just because one sim is newer than the other, doesn't mean its more technologically advanced or as expandable as the old one. Likewise the graphics better.
All these companies need to make money to survive (time and time I have said this), therefore, artwork may have to be sacraficed in order to complete a program on time. In some sense, it also depends on the technology available at the time. Trainz was designed and coded for Pentimun 2/Pentimun 3s (but I got it to work on an AMD 475mhz K2 processor), KRS is more designed for those that are Core Duo/Athlon 64 equivlents. (Get a sense of the era, thats what I am trying to say.)
So therefore, each argument about each train sim is therefore invalid, except one, that is how easy you found it to develop for, again, different train sims go for different approaches and I think KRS goes for the all out, single file for everything approach, while Trainz is more like "bits from here, bits from there and bits of my own" apporach. All have their distinct difficulty levels.
The last thing that matters is obviously what I said earlier, what you can do with the sim. MSTS has no scripting engine known to the community, so that isn't as expandable (that we can argue over and reach some sort of conclusion, right and wrong). Trainz you can do virtually anything for, you could even with a lot of thought and a lot of tinkering with the code, create a driving sim, its not impossible. All the file "Trainz.exe" is, is a compiler and language interpreter. (Just like many game engines. Ok, some bespoke files are included and locked, but pretty much anything is possible, except file handling, but I wait for conformation about that).
KRS is about the same, pretty much anything can happen, but that has to be confirmed to the developers.
So lets end the argument, what matters is we (as a self sustaining community) take these platforms and tools and improve on it.