Hmmm, a very intriguing question. And I definitely get the distinction; it’s a choice between a game you KNOW is crap, and one that SHOULD be better but isn’t.
Honestly, I’d say mediocre games are worse.
With crap games, like the OP stated, there’s no expectation of quality. You can choose whether or not to subject yourself to the crap, and when it is, you can chalk it up to being a bad game and move on. I mean, I don’t think anyone boots up Pepsiman or Burger King Sneak King and expects a deep experience.
But when there’s obviously love and hard work put into a game, and it’s so close to being good but something’s holding it back, to me that’s really frustrating.
One example (for me, at least) is Spider Man & X-Men in Arcade’s Revenge for SNES. The graphics and animation are very good, the music is EXCELLENT, and for the most part it gets the characters’ powers right and makes them fun to use (except for sticking Storm underwater). I used to keep giving it chance after chance, certain that it would be better, but it’s just let down by a number of issues: abhorrent level design, humongous levels with no checkpoints, and no password or save feature for a game that takes a LONG time to finish. It would always end in frustration, much more than any straight-up kusoge.
Also makes me think of Mirror’s Edge. When it’s good it’s REALLY good and hella fun. But again there’s a few issues holding it back, mainly the gameplay often devolving into maddening trial-and-error and questionable level design decisions which force you to take things slow, eliminating the main thing that makes it fun in the first place.
Just my take. I’ve had many games I wanted to like but just couldn’t.