Rough footage?

1. The footage in question was cut from the negative and not saved in that state. It was supposedly saved as interpositives, although most of it looked to me like it came from an answer print (which would explain why some of the trims had an optical soundtrack that was clearly shot to hell).
2. Paramount's negative pickup arrangement was for the negative only of the release cut, not for any other footage, which - according to John Dunning - remained with Cinepix in the state in which he decided to maintain it. Which is, as you can see for yourself, of less than optimal picture quality.
3. The filmmakers had no foresight to preserve the original cut via the negative and cut an interpositive instead, as most filmmakers of some brain matter tended to do when they got an undesirable rating from CARA.
4. Paramount was "involved" with the restoration in the sense that they own the picture. They were not involved with it at all beyond that. Lionsgate took all the initiative with trying to put it back together, as they were the studio behind the reboot. Had there not been a reboot, you probably would not be seeing this version that you're complaining about at all, as no one would have any reason to put it together for you.
5. The guys who did the DVD and Blu-Ray special features said they did some color correcting on the trims, although it doesn't look it. There wasn't enough money in the budget to do extensive digital clean-up, and there wasn't enough time to do it for the DVD.

A better question is how Paramount managed to have previously-unreleased footage of one uncut scene - featuring the shot of Harry gnawing into the arm and the shot of the killer reaching into his father's bloodied chest, both replaced with alternate footage for the "R" rated cut - which was in the same condition as the rest of the theatrical cut, but nothing else. Where did that come from, and where was it hiding all these years?