SHOULD THEY HAVE CHANGED THE PACK-IN LATER? Well, they should have considered this and done something sooner (if only to keep things "fresh"). Perhaps it would have helped. They did, later, add Bonk as a bonus pack-in...but that was much later...after Bonk had sold pretty well...
ALSO: NEC wanted to sell software and make $$$...so giving away Bonk's Adventure (or any top bill game) as soon as it was localized would have hurt them financially. Sega didn't pack in Sonic until AFTER they sold a billion of them.
ALSO: The graphics and action in Keith's underworld was pretty slick and a perfect showcase for TG-16...I would love to have seen a massively revamped REMIX of Wataru for the States. The problem is that it would have required too much work, and might still end up worse than what we got.
Part of the problem with changing the pack-in later was a strategic mistake. NEC overproduced the TurboGrafx 16 stock hardware back in 1989. Something like 850,000 units were produced and took a long time to sell through. That means they had hundreds of thousands of unsold inventory packed with Keith Courage that they couldn't do much with until they sold through it.
They started by doing mail order deals "Buy a TurboGrafx 16 now and mail in your receipt to NEC for one of these select titles".
Eventually they had to open some of the TG16 boxes and have employees stick Bonk's Adventure (and later Bonk's Revenge) into some of the unsold system boxes and put a sticker on them.
The fact that NEC over-ordered the TG16 to start with left them with far less flexibility than Sega had with the Genesis early on. Sega had no problem changing the pack-in two years later from Altered Beast to Sonic in part because they had a smaller inventory of unsold hardware and had mostly sold through it.
Absolutely. And, sadly, mail-in incentives SUCK compared to instant-gratification-walk-home-with-game-now pack-ins offered by Sega & Nintendo.
Mail-in offers are more abstract, more hassle, and, let's be honest—companies often took a long time to fulfill main-in offers.
A rational adult purchasing a system for himself would like the mail-in.
Everyone else is buying console to please somebody, NOW, and that's the power of the pack-in. PLAY IT NOW.
But at least Americans were familiar with altered beast and SMB from the arcade. In hindsight yes AB is a crap game, but as kids we went complete ape shit nuts over it in the arcade. So when the genesis released with it, it was like hoooooly shit! Gotta get the genesis!
Another game we went nuts over in the arcade.... R-type.... why not pack that in? Any big name arcade title would have given it more cred with the kids that lived in the arcades of the time. Sure Keith courage did a good Job of showing the turbos color palette, ability to generate large sprites etc, but it sucked for all the reasons you listed. One thing you forgot is that it had that cutsie anime thing going on which was unappealing to American kids. Keith looked like a big puss fairy, especially with the over world music backing him up. I want my hero to be heroic, not some anime dude that looks like he's stuck in puberty lol. I'm fine with that now cause I realize it is there animation art style, but at the time america had not been exposed to anime, so it was just unappealing.
First, I just want say that I am simply having fun arguing against your ideas, but I don't think you are necessarily wrong. I liked your counter-points. I think a lot of people would agree with you.

That said...
I hear you, I just feel that most folks wouldn't have been thrilled with an DATED, CHALLENGING SHOOT-EM-UP that had already appeared on the SMS.
I'm a shoot-em-up fan (I bought TG-16 for Blazing Lazers), but Keith was better as a pack-in than R-Type. WHY? Your typical 1989 gamer would have quickly grown frustrated with R-Type (never bothering to understand its unique mechanics with the ORB OF POWER)...Blazing Lazers, while lacking any "brand recognition", was a much more accessible shooter, exclusive to platform, and one that TRULY showed off the TG-16's sound and graphics.
ALSO, R-Type was more expensive for NEC to manufacture (this was early when HuCARD's were not even pushing 4MEGABITPOWERSUPREME...NEC would be even more reluctant to pack-in an expensive game when a cheaper alternative existed.