I feel your pain as my game seems to generate horrendous sims too. I've found that when you use the presets (eyes, nose, mouth) that you most like in 2 sims and then generate some kids that the results are much better but mostly I generate the kids and then age them into Teens (all in CAS) alter their features, a tweak here and there... lengthen the face/jaw, correct the horrible nose and so on and then age them back down into kids.
This only works for brand new sims that have never been in live mode as if you muck around with the age setting with sims that have been in live mode it completely stuffs up any reward traits etc. There's nothing wrong with using the cas.fulleditmode cheat to generate worlds filled with the kinds of sims you like to look at. It's your game after all. I ruthlessly delete all sims who appear ugly to me on a regular basis. There's no way I'm having unappealing sims in my game!
I have to edit all my townies as most of them are just not the size, shape, nor general look, that I like. So once a generation (of my own sims) I'll have a cas.fulleditmode townie day where they all get either a make-over or deleted if there is no hope for them.
It doesn't bother me if the game is using a particular townie for a job, the game will generate another sim, if the sim is ugly to me... it goes.
I've found my own sims make pretty gorgeous kids but I've worked super intensely at creating 'founder' sims that really appeal to me personally and I always marry my own sims together and never use townies unless they've been made-over etc, that way the off-spring seem to stay fairly attractive.
So, now you know my 'secrets'. lol call me shallow, I don't care there's no time for sims I don't like the look of.
My game, my rules. *grin* Also, in all seriousness, beauty is in the eye of the beholder. I've looked at sims on the Official Forums that other people think are gorgeous and to me they would be instantly deleted! If a sim is appealing to you that is all that matters in your own game.