I do agree on the washed up game engine bit. With the rose colored glasses off, City of Heroes would look very shoddy to the average gamer.
I'm not so sure about that.
I see screenshots for new games, and think "Wow, that looks amazing!".
But... screenshots are taken on top-end gaming rigs, at the highest settings, since you don't care about frame rate.
Playing CoH, I don't think I ever had the graphics turned up past about 50% on anything, in order to move more smoothly. When you're superspeeding or teleporting around, it's more important to have fast smooth movement than high resolution.
So, computers are better now, on the average, than when CoH was shuttered. So, now, more players can raise the graphics... is CoH played at gaming frame rate that much worse than modern games played at the same frame rate? Sure, it can't compare at the top end of graphics, but there are lots of gamers out there whose machines can't handle those top end graphics, whether from CoH or a new game. They'd have to turn down the new game's graphics to 20%, while running CoH at 60%... at those settings, CoH may be worse, but would it be significantly worse?