I've been following manga and anime since before there was any kind of import game scene so excessive use of English is something I've been familiar with for so long I can't even remember not seeing it. It sure would be inconvenient for me if it were something other than English since the Engrish represents %90 of what I can understand in printed Japanese material.
Its very true though that when my square friends see my model magazines and PC Engine games and such they always ask why there is so much English in them. So I guess the answer is "yes" people do seem to find it strange.
The reason for this is twofold, I think.
1: White people are cool to the Japanese, and Americans are the ultimate white people. There are stories from Expo '70 where Japanese would ask random white people to sign autographs for no other reason than them just being gaijin. In the 80s there was a very popular trend of T shirts with English non-sequitors on them like, "Fire!" or "Smooth", or "f*ck!". Then there is of course Hollywood. Even if a movie from the US is given a new name, its given a new English name. ie: Time Bandits becomes Bandit Q.
2: It seems like at least %99 of all loan words in Japan are of English origin. Rather than invent new Japanese words for non-Japanese things, they will usually just abbreviate it and slaughter the pronunciation. Rarely is there a kanji for something like "CPU" or "water pump".
There are plenty of examples of using French or German or whatever (ie: Maschinen Krieger) in genre games/anime/whatever, but it can be extremely hard to decipher since katakana murders those languages even more than English. Its also hilariously hard for Japanese to pronounce.