Yes, they loved the compactness and convenience (well, I’m not sure anyone ever loved the rewinding/fastfowarding experience)
But the quality/color was always a noticeable downgrade from broadcast quality video (and that was a noticeable downgrade from film). But the sacrifice was absolutely worth it.
It is notable that LaserDisc only came out two years after VHS (and before it reached mass adoption), and it could produce (and often exceed) prefect broadcast quality video. Anyone could see the improvement.
Yet LaserDisc never had much success outside of enthusiasts, simply because it couldn’t match the convenience of VHS. Well… it was mostly the lack of recording, but that’s an aspect of convenience too.
You’ve also had to flip the disk halfway through a movie, it couldn’t do two hours of continuous video, unlike a VHS tape.
The lack of recording was also a killer, if you went with VHS you could record and watch home movies if you had a camera, read videos at the video store, record from broadcast TV, it was much more versatile.
For me and most people I knew at the time, VHS didn't have a noticeable quality loss over broadcast unless you were watching LP/EP recordings.
Many TVs people already had in the 80s didn't have RCA connections so VCRs were connected via twin lead to F connector adapters. They had the same noise as the antenna or cable input. So your commercial tapes usually looked about as good as broadcast. If you actually read the instructions with your VCR to set the timing correctly recorded broadcasts in SP mode also tended to look pretty good.
In absolute terms the VHS video was worse than the original broadcast but on the TVs we had it was hard to notice.
This definitely changed through the 90s. Larger and brighter tubes made the deficiencies of VHS more noticeable. Moving to cable TV from antenna was also very noticeable and made VHS quality more apparent.
If you happened to see a LaserDisc video as a comparison to VHS then the quality difference was stark. As much as VHS and DVD by the late 90s and early 00s. However I think that direct comparison was out of reach for most people.
Richard Gabriel: Worse is Better