I'm making a 2d top down game and I want to be able to make my characters/monsters rotate to face any direction. I don't like the look of having 4 directional sprites(as in left facing, right facing, up and down) and just using the closest one to the direction the character is moving, and I don't think I can afford to have sprites made with 8 or more directions for every animation, so I'm just going to have 1 set of sprites for each animation and all the images will be from a directly top-down view, that way I'll be able to rotate the sprite in code to face where I want it too.

I was looking online for some graphics I could use temporarily while I'm working on the code because I'm not ready to pay somebody for real graphics yet, and I noticed there is a huge lack of sprites from this view. Almost no games use them. Anybody know why? what is so bad about them, the few I did find didn't look to bad to me. Do you think I should just go with 8-directional sprites and use the closest rotation?

For characters (people rather than vehicles), top-down looks very unatural since you almost never see humans from that perspective in real life... or anything for that matter. In pure 2D it's also extremely hard to create a sense of depth ("Is that square a different floor tile or a pillar? Guess I'll have to run into it to find out..."), so getting the graphics to integrate with the gameplay can be a challenge.

Have you looked into pre-rendering sprites? That's how most games that have a 3/4 or isometric view deal with the issue of animating from every angle. If you don't want to do that, I would just roll with pure top-down and be careful about making sure there are visual cues to the player about what's a wall, what's a floor, what's a pit, etc.

If you mean top-down as in Alien Breed top-down, you can simply create a single sprite and let the rendering hardware do the rotation for you. That way you're not restricted to a finite (4/8) number of directions.

Note in the screenshots how shadows are used to convey a sense of depth.

It's done - I've played quite a few games like that. Counterstrike 2D for example.

Pros:

You only need one image, and you just rotate it for every direction (though usually you still have it animated).

Cons:

It looks horrible. (subjective + mild exageration)