I believe its not about looks as its about UI. If the end-user experience is bad, then the looks will be ignored in an instant. If the UI has flow, is functioning and it gives what users came for and it doesn't cause that many problems in user experience, then the looks is only something that can be neglected if thats not too bad.
There can be times that the UI is something that wins user over other sites. The known cases of Flickr (that blended good looks too) and GMail.
But I've never seen a fancy looking site win users over others, just for that... and I will be a little hard now, and say that, users will not switch over to Virb just for looks (and I don't see anything new or fresh)...maybe new users will pick it over MySpace (if they like it more) but see masses of existing users moving to it, i don't see it happening..
On the other hand, the sheer scruffiness of a myspace and some of the content on there drastically lowers the perceived entry standards for one to participate. Therefore you have more people unashamed to put up their poorly designed sites.
It's just that some sites like myspace have so much momentum that users will go to them despite their poor design because all their friends are there already.
The problem in terms of design is just the opposite. I would say that users' high expectations with respect to presentation have hurt web startups in a big way since many founders can't afford a professional web designer. Flash over substance is always a bad thing.
Sometimes ultraclean design can send a message of fanciness or snobbishness that turns off "ordinary" people. But I think a good designer can temper that fairly easily.