First of all, I think it's great that you're taking a logical, practical approach to this issue.
There is a lot of passion around rescuing/rehoming racing Standardbreds as they frequently end up in auctions/kill pens after their racing careers have ended, just like TBs do, and it's sad to see ex racehorses treated as disposable.
That said, STBs are bred for pulling, not for riding. and it shows in the conformation. Some STBs make the conversion to riding horse well, others do not, depending on conformation, and of course, training. I've seen some make good lower level dressage horses and event horses, but they have been the exceptions. Their great strength is their disposition; usually they are lovely horses to work with. However, there are some special issues/concerns retraining one that has been broken to harness, primarily with teaching it to bend, and also somewhat with the canter.
She says that he is not pretty enough, or has nice enough paces, for dressage and does not have suitable conformation for jumping.
Have you asked for details about this? Do you understand what they're seeing in this horse that makes them say this?
I'm going to assume for the sake of this discussion that these folks are right, and that this horse's riding future is limited to pleasant trail horse. I seriously question if the kind of time you'll be putting into the horse is worth what you'll get out, especially if your goal is to be able to do some lower level dressage and jumping. Ultimately, though, it's your decision - do you want to put 18 months of work into this guy to get a trail horse, or is your expectation to put the time in and get something you can do more with?
It also sounds like you've found wonderful mentors who have your best interests at heart, and their offer of a more likely horse to focus your time on sounds like a good one since your STD isn't under saddle yet.
I would like to hear more about *why* they don't think this horse will succeed as a sporthorse. It would also be helpful if you could post a photo of him.