Entertainment is; play, books, crafts, end of story.
The backlash against sitting kids in front of a screen was probably forseeable, but outside that, I think a more general underlying question is, WHEN kids inevitably start to interact with technology, are we going to drive them towards the basics that we learned, or jump them into some more updated starting point? Obviously age matters, but it's hard to determine when and how much you expose children to technology (technology which will almost certainly dominate their lives much more than any previous generation). I think you have to depend a lot on the child, particularly their age. It's important to be well rounded, of course, but it's all a matter of balance. Do I think a two year old NEEDS an iPad? Of course not... nor should they spend their days glued to a TV. But will exposing a child to age-appropriate tech as a part of a well rounded lifestyle help them in the long run? Well... it's tough to say.
In general, though, yes, I want my children to learn fundamentals that are important to a deeper long-term understanding and appreciation for things. Just as learning to play peek-a-boo then hide and seek then tag then ball and team games and having unstructured exploration time throughout build some life skills, picking up Call of Duty as the first video game ever played is silly. The underlying question of retro games is, then, is the more modern collection of child games a better starting point than a classic game? I'd mix both, but if I had a child that really showed an interest I would try to help them understand the history better, by exposing them to classic games. This is a little harder with operating systems, but I would certainly try where possible. If my child is interested in programming I'd try to teach logo and basic, but I'll also utilize more modern built-for-kids programming tools, whatever those might be that are appropriate to their age.
But I think the question is important as posed because of how quickly technology changes. Balls are largely the same as they were when I was a child, computers are not. The context that understanding 8-bit video games gives to modern computing seems important to me, so, yes I think it is an important lesson to my child, while at the same time it is now much harder to balance children's social, play, family, and learning time (amongst other categories).
This approach is the same with sports, games, operating systems, robotics, rocket science, finance, and every single aspect of life for which lessons can be taught... underlying groundwork, history, and basics are important, as is balance and wide exposure, as is the narrower focus of dedication when they do choose to specialize. It's just that the groundwork we were taught as kids for new technology is vastly different than the groundwork that is available now, so it's a worthier question beyond an answer of just "don't sit your kids in front of the TV all the time".