While the Battle of Villers Bocage was a rather minor engagement in terms of forces involved the consequences were more significant than you might imagine.

After the landing, the German forces failed to fully contain the Allied advance inland and had trouble to bring enough troops into the theater to counter the influx of Allied troops. The German frontline infantry divisions were crumbling under the immense pressure. For the first week of Normandy combat, the front lines were in flux and if the landing could be contained was not certain. The Hitleryouth was trying to beat back the invading troops north of Caen but got more and more frustrated with their efforts same as Panzerlehr. At this point in time, Germany was not set on "defending" the Normandy landing but to try and annihilate the landing troops altogether. Keeping the Allied forces as close to the Beach as possible to not allow them to bring in more resources was vital for the German defense plan. More German Panzer divisions were in transit to prepare for a major counter-strike to roll up the invading forces most notably the 2nd SS Corps. Losing Caen and valuable room to the Allied would decrease the odds of succeeding significantly. Every square mile captured by the Allied was important for their forces to get combat ready, for airfields and other factors. Furthermore a breakthrough at Villers Bocage plus a possible exploit towards south of Caen would have threatened the 12th SS and 21st Panzer. It is unlikely the 12th SS would have been able to retreat against the pressure of the Canadian forces.

The Battle of Villers bocage meant the end of a "mobil" war, with the British trying to take the vital city of Caen. When the "breakthrough" around Villers Bocage was beaten back a long period of costly attritional warfare set in. The front lines were secured and no imminent threat for Caen was realistic. The British forces were to weak to break through German lines. For the Germans this was a major success, the front line was reinstated and allowed for a theoretical heavy counter strike towards the beach. As we all know this never happened because the British pressure soaked up any offensive potential but repelling the advance of the 7th Armoured was very important. Since the Allies had their backs to the sea a major breakthrough into their lines could be catastrophic, to set up such breakthrough a front line close to the beach was important. Losing the contentin peninsula was not that significant compared with a major breakthrough around Cean. Every possible plan to defeat the Allies was about getting through the beaches and roll up the Allied forces from behind.

Propaganda part:

Villers Bocage became that well known due to the German propaganda efforts which were rather successful, they tried to show the German people the Wehrmacht was dealing with the threat and it also had a lasting impact on the moral of British forces. Wittmann was a well known tank commander and the battle of villers bocage was a welcomed starting point for the German propaganda to show case their superiority and ability to beat back the Allies.

You are correct in your assessment that the battle got more attention than it deserved but it certainly was important to the first phase of Normandy combat.