How does it defeat the purpose of their game? The game is still there, they still made it, and many people will still play what they do without touching it. People mod stuff all the time. It's creative, and in no way detracts from the work these guys put into it. And nobody takes away credit from the original demakes either, at least none of the mods of 7FC that I've seen do that. I highly doubt the makers of Minecraft care if people do graphics mods of their game, and that's an original creation. These guys are demaking a game made by Capcom. It's like someone draws a mustache on a photo, and then get mad when someone else adds a beard. Sounds pretty silly to me.
I'm suggesting that, in a sense, it cheapens their original effort. If someone were to legitimately make a piece of art, even if it's based on another piece of art (such as your mustache and beard example), it is still their work of art, and some people just don't like to see their work altered. The makers of
Minecraft might actually care. Modding is frowned upon by various companies. I know Blizzard reserves the right to ban people who use mods in
WoW. If the
RM8FC team doesn't want their material modded, that's entirely their call. It may be based (heavily) on Capcom's product, but this is still their creative work, and it's their right to "protect" it if they want.