A pack-in is supposed to serve two purposes: sell systems, and give gamers a good first impression when they actually play, so they buy more games.
I think Keith Courage did an okay job giving gamers a good impression when they finally powered it up. There's no denying the graphics and music especially are distinctly "16-bit." I remember googling over how real the ice blocks looked in stage 5.
Where Keith Courage failed, is in selling systems. Before I owned a TG-16, I had never heard of Keith Courage. And even if I had, it's not the sort of game that I would've seen a screenshot of and said, "I want the Turbo over the Genesis." Keith Courage was a no-name game and virtually zero street buzz surrounding it.
In the case of SEGA and Altered Beast, I think things went the complete opposite direction. Everybody knew about Altered Beast because of the arcade. Altered Beast was a success in selling systems which is arguably more important than simply impressing the buyer, since once you've bought the system, there's a much better chance you're going to buy games for it.
Keith Courage is a decent (heck, even good) game, and it's clear to me the reason they picked it as a pack-in. Unfortunately, it was too obscure to successfully sell systems, which is really 3/4 of the battle. As soon as Bonk was released, they should have pulled Keith as the pack-in and replaced it with Bonk's Adventure like SEGA did with the Altered Beast/Sonic switch.