I don't hate 1 and 3, they're just forgettable.
1 had awful collision detection/hitboxes and 3 feels like they took everything of 2 and made it a little bit worse. I've played the fan translated version of Bare Knuckle 3 and I'd still rather just play Streets of Rage 2. I've also played the uncensored version of SoR2 which restores the panty shots with Blaze to the English game but that's just a curiosity.
I agree to some extent, but 1 and 3 I did not find forgettable. More so the first game. Yuzo's soundtrack, the intro, and the special clear all attack are the most memeborable things in this game. The stage design is average aside from stage 4 and 7. That said, all of the stages look colorful and are pleasing to the eye. Of course, 2 went above and beyond to improve all of the features. SOR1 is still better than Final Fight (SNES version only) & Final Fight 2 & 3.
When it comes to Sega stopping the remake I can understand it. You have to protect your IPs or you lose them. Sega have always had the impression of being a nice guy for fan games but that is because the fan games released were also coming along official releases. I imagine that when Streets of Rage 4 actually got the greenlight they had to stamp down or potentially lose the property.
Still a dick move. They could have hired them like they did with the Sonic fans with Mania. It's not exactly like the case with RE2 Remake (though similar in certain cirumstances). When fans were trying to remake RE2 with the Umbrella/Darkside Chronicles assets and engine. At least Capcom was a bit more polite about it. And the guys who did that decided to take their resources and make a new game called Daymare. Which is RE2 in all but name.
SOR4 did not get announced until last summer. The cease and desist order came in around 2015. They could not have started the concept phase until around 2016, with per-production not coming in until 2018. That's just my theory though. Also, you can still find the game on many sharing sites, so the cease and desist did not much at all. Not to mention, there was another fan SOR game that came out earlier in 2019. it's called Streets of Rage 2X for those curious. I am not going to fret over it, as what is done is done.