One thing for sure, Classic Racing is not racing on the cheap. Or is it? It is if you're comparing it to racing in BSB every other weekend.
I'm sure most folk are comparing Classic Racing with racing at Club events on a modern 3/4 cylinder machine, and modern club racing is modest in cost.
If you are looking at running something pretty trick at the Classic TT, you're facing extremely high costs. Creg ny Baa mentioned my RC30, and the costs of running that are off the graph. Sadly, even if you gave the bike to HRC to prepare, and put MD or Bruce onto it, it ain't going to beat an "XR69" or a YZ500, so there is no incentive for me to make it go faster.
Shipley Manx mentioned whether the public care that his bike is original, and the one next to it is not. Sadly Shipley Manx, they DON'T care, especially if, because the bike is tired, it only comes round once. The spectators just need bikes on the track, and the modern replicas are obviously more reliable. How many riders in the 350/500 race are running original Manx's 7Rs or G50s? I think the answer is none. 
The only thing that bothered me about the F1 Classic is that the bikes that are doing the winning were NEVER on the original class known as Formula1. In fact the fake "XR69" has NO racing pedigree whatsoever. At least the YZ500 is a genuine race bike, albeit a GP bike that would have licked the F1 bikes into the dust years ago. The "XR69" was created by the very clever and subtle change of the original rules as laid out in September 2012 which stated that all four strokes above 750cc had to be manufactured before 1986, by which I presume meant 31st December 1985. Then the regulations came out and they had changed that date to "before 31st December 1986. And that meant that the original air cooled XR69, could become a GSXR1100 engine hybrid with an engine as big as 1299cc if you wanted, and guess what the GSF1200 is still around looking exactly like an old GSXR1100! Arise Sir "XR69", oh, and these bikes are available from........
So you have a bike that was never raced being the bike of choice for a Classic race that is meant to recreate the original F1 race. Even the advertising promoted the "chance to see RC30s OWO1s GSXR750s and ZXR750s back on the TT course.
Well that's true, they are out there, but with the exception of the ZXR750, nowhere near the front, and as parts for them become scarcer, this will continue.
Back to the spectators, well they're happy to see bikes on the track, which is why the event is a success, and despite my misgivings, I support it.