Supposedly Mario 64 was just Mario in a room for the first year to get the jumping to feel right. If it's good enough for a global company to polish first, then it's good enough for the rest of us. You don't know how to design levels until you know what you have.
From the reaction I get on Twitter, people would rather see a polished game with wow factor than anything else. This is useful to build the hype as you can show off that polish for years as you develop. Show off a meh looking game and people will lose interest and move on real fast and that loss of interest sticks with people.
As for development vs polish, they kind of go hand in hand since development is part of the polish process as development is a catch all term. However, you can do an on off method. When you get bored of pushing your game further, you can polish what you have. If you get tired of getting bogged down in the details, you can push your game further with broader strokes of development. Develop with one hand, polish with the other.
When I push forward with development, I like to play the entire game once a week. That will remind me of highs and lows of the game, where you need to polish and make it feel better. Even what to cut. If I play something that I developed months ago, I will turn into just a player and get reminded where you need to put more effort with what I have. I've cut 90 minute games down to 45 to make it more enjoyable. That too is part of the polish process.
Seen below was 2 months of polish during development on and off. From the backgrounds, to the jumping, to the particles, to the explosions, to the slashes, animations, the FX, doing a different kind of screen shake for hits and explosions, the controller rumble, how the sword hits, how enemies react when hit, making the emoticons pop, the parallax, the moving clouds vs player movement to not make you sick, how the enemies die, what happens as they die, the name pop up, the layering of tiles, how the life meter reacts when you take damage. It's less of a look than a feel. Everything blends together like making a soup. You either have salt water or you have something that can make an entree for $35 at a fancy restaurant.
The first speaker of this talk has some good strategies for this:
He talks about adding polish-placeholders. Like, do add little sounds and screenshakes as early as possible.
But finetune them way later on.
Screenshake is easy and a lot of developers do a pretty ghetto version of it where you can see the edge of the screen. I always prefer to do sounds last as sound can enhance things, but if you have a good game before you add sound and music, then you have something special.