I think as a proxy it fails completely: astroturfing aside stars don't guarantee popularity (and I bet the correlation is very weak, a lot of very fundamental system libraries have small number of stars). Stars also don't guarantee the quality.
And given that you can read the code, stars seem to be a completely pointless proxy. I'm teaching myself to skip the stars and skim through the code and evaluate the quality of both architecture and implementation. And I found that quite a few times I prefer a less-"starry" alternative after looking directly at the repo content.