The inherent problem with M.U.G.E.N is exactly what you posted.
"Potential hasn't been realized." "If made correctly." "For free."
The fact of the matter is, M.U.G.E.N is simultaneously easy to use and create characters with, but is still fatally limited due to being free, following a set standard of gameplay without any intrinsic regulation or structure, and the very fact that anyone can edit it. Making characters is no problem. In extension, everyone makes characters. There is no standard for any given created character, so it's impossible to "balance" a character properly. To boot, it takes a lot of effort to balance a character rather than just give it a moveset with hitboxes and call it a day. If it's virtually impossible to balance characters to begin with, why should anyone even bother to attempt it? To create a full game? No, your characters are still used outside of the game to face Haruhi Brando Simpson DX, and you can't help that. But then, what's the purpose of making a full game in M.U.G.E.N, if the point is to isolate your characters from others, create your own mechanics and systems that are used for those characters and nobody else? Well, there is none. That's why you don't use M.U.G.E.N to create full games. You program your own fighting games in an actual general-purpose language. You don't take advantage of a game engine. You're still free to do whatever the fuck you want, you have all the potential M.U.G.E.N offers and more, you make it how you want, and you can sell it. Unless you have people that are too lazy to learn programming and do it the normal way, you aren't going to find full games in M.U.G.E.N. You shouldn't find full games. You will find all the misfit, unbalanced, drivel characters shoved in that people want to see in a fighting game, just for the sake of it existing; not for any actual purpose besides beating up Konata Guile Margatroid the Hedgehog. There will never be balancing as long as M.U.G.E.N stays how it is, without regulation or structure. This is why I don't like M.U.G.E.N.
M.U.G.E.N will never win because it is M.U.G.E.N.