I think some of you are missing exactly what "good design" is.
It's got nothing to do with whether the style is Japanese or not, it's got nothing with what extent the technology is being used (that is, you can have amazing detailed graphics that push a system to the limits and still have poor character design, and you can have very simplistic graphics that have amazing design), and it's got nothing to do with the popularity of games because a game can still be very enjoyable to play even if the character design is awful (however, if you want to get into pure "game design" then it's a different matter). There's not much beyond that that can be said about good design, since it's just an innate aesthetic sense. Having some background in art helps to give you an ability to judge if the design of a piece is harmonious and truly pleasant to view, but even then there's always a strong degree of opinion.
Personally, I think Rare has done well at times, but they've also had some pretty poor designs. Overall, I'd say they've had more misses than hits. Just looking at the Donkey Kong Country series, I think they gave DK quite a nice makeover, and I don't see anything wrong with Diddy either. However, Dixie is just ridiculous looking, and Kiddy makes me want to barf. Most of the side characters didn't fare too well, either. Don't even get me started on the Donkey Kong 64 designs.
The Battletoads look plain disgusting, as opposed to, say, the Ninja Turtles (I'm ignoring the recent TMNT stuff).