I must have old eyes because the graphics look fine and dandy to me, with all the settings up high and on 1600 resolution.
Granted, I'm sure plenty of games have more vibrant colors, less polygon jointing, smoother textures, blah blah blah, and I know that Doom1 sure looks pixelated to me now (god people thought that looked so great, back then, lol) but it's never going to look like a movie (unless you want to pay more and wait longer) and so I'm happy with Kotr's graphics as is.
But! A new engine would still be nice - if only to make something different/have new potential options instead of more of the same.