There's nothing is wrong with pao ferro in general. It's an excellent wood for fretboards and it can look gorgeous. A nice piece of pao ferro can look more or less like rosewood. Not like the really dark pieces of rosewood but more like the "brown with black streaks" varieties of rosewood. Beautiful! It's not as oily as rosewood though and will feel different under the fingers. Personally I prefer pao ferro with a finish.
FENDER instruments with pao ferro is a different matter. They look like

. I don't know where Fender get their ugly, pale (and sometimes even ORANGE) looking pao ferro but they must have gotten a huge batch of B-grade pao ferro for cheap. No-one does an ugly pao ferro like Fender. Every Fender pao ferro board I've played has also felt horrible under the fingers. It feels like they dropped the final sanding. Nails on chalkboard. The can look/feel SLIGHTY better with a bit of oil (Fender ship them out bone dry) but they still feel rough and look very bland IMO.
Before Fender started using their sub-standard, ugly looking pao ferro on cheaper MIM models it was considered a boutique choice used by many top luthiers. It still is (to some extent) but it has probably become more difficult to sell pao ferro as a top quality wood after Fender ruined it's reputation.