Totally -- good graphics are imperative to the gaming experience!
However, art direction is way more important in my opinion. Most games have good graphics, and by graphics I mean the use of technology and technical artistry to push the limits of pixels, sprites, polygons, colors, and textures. Most games don't have good art direction, meaning the vision of an artist that affects character designs, character models, sets/environments, etc. (Xavi might have a more apt description of this). The aforementioned SaGa Frontier 2 had brilliant art direction, executed expertly into a very nice graphical experience.
There are a few games that come to mind that didn't have good art direction, and suffered as a result. I though Shadow Hearts: Covenant had one of the best storylines of any RPG I've played, but, even though the graphics were good, I thought the character models were dumb and the environments pretty forgetful. I never finished the game, which I kind of regret.
Besides suffering from the same fate as Shadow Hearts, Jeanne d'Arc had an uninspired, rehashed T-RPG quality to it that I quickly grew bored with. On the other hand, around the same time I was immersed in Final Fantasy Tactics: The War of the Lions, which I had already played before, but it had beautiful stages and character designs courtesy of Akihiko Yoshida. (It should also be mentioned that FFT puts Jeanne d'Arc to shame in the story department.)
So yes, graphics matter, but so does art direction. As such I think art direction can be put to the same equations described above, but I would add a third rule:
- Bad art direction takes down good games with it.