You're leaving out Capcom's other big franchise, Monster Hunter which definitely goes for realism.
Does it? It doesn't look like South Park or Inuyasha, but that doesn't make it realistic looking. Maybe certain entries, idk, but the latest ones certainly don't, they look fairly anime to me (which is good, otherwise they'd look gross too). I'm not into the franchise though, so I can't say much.
They have all the monsters move and have features of real animals so they'll look believable. The whole art direction of every mainline Monster Hunter has been realism, the spinoffs go for a stylized unrealistic look.
I'm more specifically talking about human character designs. I don't know what counts as a spinoff, I assume the Stories ones?
Dragon's Dogma did the same thing, the anime to Dragon's Dogma does use stylized designs however.
Are they butt ugly too?
Dead Rising was also very much using realism, which is what made Frank's outfits look so funny.
Looked extremely cartoony to me, not going for gritty realism. Played really goofy too, with a bizarre story.
Streetfighter goes for unrealistic proportions with specific characters having heavy emphasis on specific physical features so they look distinct or larger than life. However they have been using more realistic textures for the characters and especially in stages and background objects. It's stylized but it's not going the way of 3 or the Alpha series in terms of style and it leans heavily into realism to make things look legitimate or believable, they're also not having everything be 3D and looking 2D Stylized like Guilty Gear.
Street Fighter was extremely anime and very heavily stylized, even up to SF4 with their watercolor brushstroke visual gimmick in that game. SFV stepped a bit away from that, and now SFVI so far looks like it's gonna go all-in on the realistic/gritty/ugly thing too now.
I'm sure R.Mika will look like a man and be very covered up. I remember MvC:I was criticized for uglying characters up a lot, despite it's more comicbook style art. It just seems like Capcom intends to do that, and IIRC leaks showed documents confirming their woke direction they're heading in.
That's basically why realism is used in the first place, it's to give legitimacy to fantasy concepts, things that would be considered unreal or impossible so to fortify the suspension of disbelief.
I don't think that's a general rule, sounds like preference.
I don't think characters always need to be waifu designs, but there's a clear agenda to make females hideous now (males looking funky too, at least Capcom's Dante). Trish looks better on PS2 lol