I was there and I think it's mostly fantasized that pixels were
that different than the blocky pixels they were. I have a (still working) real vintage arcade cab from the mid-eighties, with an old, blurry CRT. It's amazing to play on that vintage cab (especially
Robotron 2084 [1]) but it's not because of supposedly "blocky pixels not looking blocky".
It's amazing because the joysticks are amazing. Standing is arguably cooler than sitting and then when things gets hectic, you'll physically "move" (or let say "shake") the cab by frantically going left/right/whatever.
In the case of Robotron 2084 it's amazing because nothing today offers the same gameplay: you need two 8-directions joystick, on to move in one of 8 directions and the other joystick to fire in one of 8 directions. They don't make it like that today, unless you play a Robotron clone using actual arcade joystick. And even then: you better have a full-sized cab if you want the experience to be even more fun.
Sure, we had scanlines and whatnots but it was still very close to blocky pixels shown today on a modern flat monitor without any shader (for example without artificially recreating the look of a CRT).
Also the "blockiness" of them pixels back in the days was highly dependent on how old your CRT was.
It's not as if there was "one correct bluriness" induced by CRT. Every CRT brand / age / model had different characteristics.
To me the "supsension of disbelief" was there. For example I remember playing Sundog: The Frozen Legacy on the Atari ST. One of the best game ever made (by FTL, who then created Dungeon Master, which is basically the ancestor of all FPS games). When I was playing Sundog, I was a rogue space trader buying low/selling high, gun fighting in cities, etc. And I remember it as... Very blocky [2].
[1] https://en.wikipedia.org/wiki/Robotron:_2084
[2] https://en.wikipedia.org/wiki/SunDog:_Frozen_Legacy