the honestly pretty meh action (particularly the arsenal was rather disappointing) made me think of it as a bit of a glorified tech demo
Disagreed, I've been hesitant about replaying Unreal for a very long time exactly because I feared it would be that, but I did it for the first time since release last year, and both the action and the arsenal are great. The skaarj are essentially UT deathmatch bots - they strafe around, jump on props, use weapon alt-fires and even pick up health packs and weapons they (accidentally) run into. Some of the later stages where you face multiple skaarj at once are top level FPS action, and the other enemies aren't a lot less exciting either, especially since they are well placed, because the level design itself is also very good. Likewise the guns are pretty great to shoop and most of them remain useful all the way through against different things.
I will however second that the last 1/3 of the game is tiresome. At that point it feels like the environments get way too 'recycled' and familiar (Nali Castle being the top stinker - it's just a generic medieval castle, there's very little difference between it and Bluff Eversmoking, and why would the Nali even need a castle to begin with?), while the skaarj mothership has way too much stupid and opaque shit to it, like stages where you have to run around in circles killing seemingly endlessly-respawning skaarj until it turns out that the respawns aren't endless and you just have to kill 837469 of them to progress.
Still, the first 2/3 are some of the greatest shooter gameplay out there, hands down. Not just because of the atmosphere (which is top notch, Unreal is one of the few games out there that feel genuinely otherworldly), but also the action and level design. ISV Kran and Bluff Eversmoking are such outstanding levels that they both simply have to be experienced, and it's further amazing how completely different both of them are.