Should a good system sound bad with bad recording?

Psychic: :)
Not far from the truth (if at all far...)!!

if one assumes it ("good system") means as accurate as one can afford, then such a system is at the mercy of the recording

I would qualify this to "accurate to the point source".

I like such a system. And bad recordings sound worse -- but one can still enjoy the music; I don't suffer.

is it possible that many of us ...want a stereo system to sound as close as possible to the correct instrumental timbre--as we remember it, regardless of accuracy considerations

Maybe, ultimately -- but from a hi-end consumer's point of view -- probably not.

It seems that many audiophiles choose one of two schools of sonic illusion (preferences changing with fashion trends of course)
The "Transparency" school: the illusion of the musical instruments being suspended in space before us, clearly delineated. Add a liberal measure of mid bass (often perceived and reported as "bass") and you;re there.

The "Neutral/ musical" school: "warmth" -- i.e. some prominence in the mid/lower mid range -- at the expense of ultimate clarity -- the latter seen as hearing every sound contained in the recording, however trivial or little. This is termed "neutral" because the prominence referred to above should not be due to non-linear distortion products...

IMO, YMMV, etc.