In the vintage / higher end instrument world (e.g. Gruhn Guitars), the following gradings are used: M = Mint; NM = Near Mint; EXF = Exceptionally Fine; EXC = Excellent; VG = Very Good. Obviously this has a significant effect on the price and eventual potential resale value. On the other hand, an otherwise top flight instrument in only VG condition might bring it into the price range of a player rather than a collector, and sound wise it could be just as good.
For the record, "VG" is hyperbole. Most examples I have seen look heavily worn - I would call them "poor". Gruhn used to have another category, just "Good", now deprecated (I would equate this to "renovator's special" in another well known arena).
So, yes, appearance does matter, but mainly when you are buying or selling; and poor appearance can work in your favour if it allows you to get an instrument you could not otherwise afford... on the other hand, poor appearance could also go along with more significant structural problems as well which can mean money is required to be spent to rectify these, at least.
Of course, one can make as fine music (or as bad) on an instrument that is cosmetically poor as one that is perfect, provided that the structural basics (affecting playability and tone) of the instrument remain unaffected. On the other hand, a beautiful instrument may inspire the player to greater heights as well, maybe... just some food for thought there.
Regards - Tony