I think with the right parts added the 77/22 can be made to shoot with or marginally better than the average( think CZ) rifles.
Before the 77/22 came out, I owned or had owned .22LR's from Winchester, Remington, Marlin, Mossberg, and Savage, well before the internet even had a name. The 77/22 with the early Sporter weight barrel was in the same class for accuracy as any/all of those. Shooting the the rimfire ammunition generally available at the local gun store, and mostly Hi Speed stuff, with a 4X Leupold rimfire scope in the rings, a 1"/ 5 shot group @ 50yds was pretty decent accuracy. At that time, the new Ruger was one of the few .22's that looked and felt like a "real" rifle in hand. I don't recall doin' anything with the trigger. When the VBZ entered the market, most shooters that had one were up to speed with trigger springs and more scope magnification, and I topped mine with a Leupold 3X-9X AO, and that did turn in 0.5" for 5 shots @ fifty yds more often than not, and I took it with for antelope hunts in WY and MT to shoot at the prairie dogs out to 150yds. The VBZ's were not cheap, and I learned a lot adding upgrades, and measuring the results. It was worth the money, and it still feels like a serious rifle. I use it at 100yd offhand shoots at eggs from time to time.
I doubt they sat around the board room and said let’s design a rifle that may be a mediocre shooter.
When it was introduced in the early 80's, it was easily in the better class for styling, and accuracy, with the ammunition commonly available. It was relatively inexpensive compared to some of the rifles available, pricier than the economy options.
I think inflation and poor sales did it in. So Ruger gave us the RAR.
Towards the end of the period that 77/22's were available in .22LR, they were getting real pricey, to be kind. The shooting public wanting a really accurate .22LR, looked at the price, and comparing accuracy with other more expensive options, pulled out the extra money, and bought something else.
A few years back, I went for a Savage MKII BV, just to see if the Savage fans were just pulling my leg. (They weren't). The BV shooting entry level serious practice ammo from Eley, SK, and Wolf, the same products I keep on hand to this day, is the equal for accuracy to my VBZ, right out to 100yds. It's easily the most accurate rimfire rifle,
per dollar, I've ever owned.
The introduction of the RAR's, and the reports and comments in the forums on their performance, I decided to try a couple to see if the comments were just "hot air". (They are not). I have four of those now, 2LR and 2WMR. They've exceeded my expectations in every way, for finish, accuracy, reliability and economy. My RAR Target in .22LR is probably an indication of how well
I can shoot with my 74 year old eyes, with several types of ammunition. In inflation dollars, they might be less expensive than my Savage BV. The only modification I've used in all four RAR's is trigger springs.
No matter how I do the math, the RAR(s), are less expensive than the 77/22's, especially if you're adding on the upgrades.