Fighting movies in general tend to have stupid scripts and bad acting. I don't watch them for plot or dialogue--I watch them to see kick-ass fight scenes. If the writing or acting also happens to be decent, that's just an added bonus.
The main story problem with fighting video games is the central premise is usually stupider than your average martial arts flick: you need a reason why a bunch of fighters from around the world in a dazzling variety of styles, weight classes and possibly species would enter a tournament with a real possibility of death. The only movies that did a decent job with this premise were Enter the Dragon and Bloodsport, and they're silly too, but they had cool-looking fight scenes. (I'll leave debates about authenticity to the dedicated martial arts practitioners on this board--all I'll say is they looked cool to me.) It's no surprise that every video game fight movie basically tries to rip off the plot of these two.
The problem then, is the fight scenes in most video game movies look really bad. Is it really that hard to remedy this? Get some martial artists or athletes who can fight convincingly on camera, make them look like the video game characters as much as possible, and get a good fight choreographer. If that happens, does the story have to be good?
I think it's because your average video game movie budget, although probably not very big on Hollywood average, is probably much bigger than your typical martial arts movie budget. That makes financial-backers nervous, so producers probably insist on putting in some hot chicks or skinny emo-boys or a big-name star to draw in a bigger demographic, whether they're appropriate for the film or not. So you get a bunch of models who can't fight or act, working off a stupid script with crappy fight choreography.