According to a member of the Ultimate Disney forum the Aladdin DTV sequels, The Return of Jafar and Aladdin and the King of Thieves Blue-Ray releases are pushed back to a 2014 release in order too give them a proper HD restoration. I can imagine that RoJ print might be bad, the film was released on a shoe string TV budget that, afterwards, was way to low. So the production house propably didn’t spend much money on preserving the print.
But in my opinion KoF doesn’t look that bad, checkout the first few minutes in HD on Youtube. Yes the colors are bland and the image is soft but the animation is fluid and the characters look quite good. I don’t think it should be that much work to scale the film up to HD quality.