I agree 1000%, the first thing I noticed when SF3 came out was how much the characters sucked and how none of them came remotely close to any of the multitude of ones from Super Turbo that got the axe.
In many ways, SF3 reminded me of Alpha 1. A whole slew of new characters, new engine, new counter system, new combo system, all new art direction... At least Alpha tied most of the new characters into the established Capcom universe. They threw in Guy and Sodom and brought back Adon, 3 characters new to the SF universe, but that people knew. It sure was a big change, and I remember most people still playing Super Turbo over Alpha in the arcade, but they stuck with the formula.
By the time all was said and done with Alpha 3 Upper, that is what I think should have been SF3 right off the bat. You had every character from Super Turbo, new characters from the Final Fight universe, returning characters from SF1, and some brand new characters tossed in to even out the mix. If they had just skipped over Alpha 1 and 2 and went straight to 3, I think most players would have been satisfied with that as the sequel to SF2.
The characters and locations in SF2 are iconic. The ones from SF3 are just shit, no matter how pretty the animation looks.