Most felt the RE5 was just ugly. The early ones had the wonky pod instrument cluster and tail light. The motor's not real attractive for a naked bike. It's a PIA to keep clean with all its nooks and crannies, was heavy >500 lbs for a 500cc bike) and performance wasn't greater than their then current GT750 2-stroke triple. The terrible fuel economy further doomed it. (Perhaps the #1 reason.)
A rotary might be able to make it today if they hid it with bodywork and improved the economy issues.
See, now I don't find it ugly. In looking at my pic I see it at least as good looking as the average mid-seventies bike. I didn't mind the Star Trekkian tubular instrument cluster and tail light...most owners converted to the more conventional clusters as seen on this bike. I agree about the performance/weight, but you have to think about how it would have evolved over time. It was a new concept, so I can overlook initial flaws and shortcomings.
As now, eventually that engine would have been painted black and bodywork would have covered it on many models, as you suggested. How many times have good ideas gone "overboard" because people wouldn't adapt?
I almost bought the one in the pic a couple of years ago. It was NOS (new old stock) and had been a display in an Arkansas dealership for decades, IIRC. It went for just a bit too much for me accept.
And, yes, I would have ridden the sh!t out of it!
Here's another good pic of one that still has the tubular taillight, but has had the instrument cluster swapped ...
I remember sitting on one at a dealer when I was 18ish and flipping open that tinted lid to the cluster and thinking, "Oooo, cool!"