Don't think you have anything to worry about, there will always be people who prefer the games. Peter Jackson's films didn't become canon over the Lord of the Rings books. The resident evil films didn't become canon over the games.
Yeah speaking to a few others, I think this is actually just how the game is supposed to work. It's like a proper arcade game, you start from the beginning every time.
The AI doesn't have context for who Ryo Hazuki is, so it just infers that it's a japanese name and generates a japanese looking person. Same with Nozomi. If you use "Shenmue" or "Shenmue Ryo" then you end up with better (but very cursed) results:
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