Like Limi, I am not a fan of Gen 1 anymore (mainly due to it being broken and unbalanced as hell). In fact, I think Kanto is possibly the blandest region of the Pokemon world with the exception of the Pokemon Tower, which is still one of the most clever things the series has done, IMO. But I want to talk a little about this song for a moment. (I can't believe this one hasn't been uploaded yet.)
[youtube]cOWRNLaCMJg[/youtube]
Despite my claims that Gen 1 is massively overrated... I just can't help myself. This starts to make my eyes well up when I hear it. I don't think it has to do with just the song, though. Whenever I hear the song in GSC, or even the version in Fire Red and Leaf Green, I have no strong reaction to those versions.
I think it's less because of the song, and more of both what it signifies and how it's played. Pallet Town is where you first began in the first game. It's the place you're leaving to set out into the world beyond. If you think of Pallet Town as the place of your childhood, then the simple Game Boy tones work extremely well. It's almost like a music box plinking away, a great way to set the idea of "childhood". And that's why I think it works on the original Game Boy versions.
In later games, it just sounds too complicated, and it's especially badly noisy in Gold and Silver (not that the music in Gold and Silver is bad; it isn't.) where there's just too much going on, and it sounds kind of lifeless due to the complexity. The idea that this is a place for beginnings, where childhood is cast aside for adventure, is lost in later games.
At least, that's how I see this song.