I recently bought the WiiU VC for Mario 64 because the 16-star category seemed like a good fit for me. I decided to take a look at the leaderboards, and every single run was either done on the N64 or an N64 emulator. Is this some sort of a rule against VC or does everyone just use N64 for some other reason?

The 16 star category has a VC section as well, unless I'm missing something. You should be perfectly fine submitting your runs there.

there was this huge propaganda push from a lot of runners to demonize VC, mostly because of the Japanese players refusing to play on it