How was the DeLorean perceived in 1985?

In regards to the movie:

So how was Doc Brown's reveal of a DeLorean perceived by 1985 audiences? Was it seen as a joke? An eccentricity of Doc Brown? A symbol of luxury or frivolity or stupidity?

The DeLorean fits with Doc Brown, thematically speaking. Everything you say about the car:

Notorious for poor quality, being badly made, and a huge expensive flop

applies to Emmett Brown as well, barring the success of the time machine which is irrelevant as he would obviously already have bought the car by then.

Much as the DeLorean was a ridiculed failed futuristic car built by a now-disgraced designer, Doc Emmett Brown was a disgraced nuclear physicist and perceived to be mad as a coot. He spent his family fortune on his failed inventions, losing tons of money in the process (there's the reasonable fan theory that he burned his own manor to collect insurance. The fire is mentioned in a newspaper article in the movie). It's not that surprising based on his general demeanor, but people dismissed him as a crazy old man.

It's very fitting for Doc to choose this car which (like its creator) had spectacularly failed and was the laughing stock of those who knew it.

This is a fairly common trope: a character chooses the option that describes themselves well. When buying a pet, a social outcast will pick a lonely animal. When buying a car, the crazy failed inventor picks a crazy failed car. It's an easy way to provide both exposition (if the character isn't well known yet) and thematic congruence (if the audience already knows that both are similar).

Breaking Bad is a great second example here. Walt's car, much like himself, is a boring and bland car, and even though it's perfectly capable and has no glaring issues, it just completely failed to take off in the modern market, underselling even relative to cars with less features and worse reviews. Sound familiar?

I suspect you know most of this already, but I'm adding it because the conclusion relies on it.

In regards to the car itself: did the first BTTF change the perception of the DeLorean?

Sadly, DMC had already gone out of business by then. On top of that, a cocaine scandal left the DeLorean's creator (and thus legacy of the DeLorean itself) heavily tainted.

On October 19, 1982, the same day DeLorean's factory was announced to be closed, the man behind the car was arrested in a cocaine trafficking bust. He had been set up by his neighbor, an FBI informant, and was caught at an LA hotel saying "it's better than gold" after being given a large case of cocaine by the undercover FBI agents.

He was acquitted in August 1984, successfully claiming governmental entrapment, but the damage to his reputation and finances had been done.

There were no more cars to sell, so there wasn't much to gain for the movie. However, there is some silver lining here:

Thanks to the film, the DeLorean was elevated to icon-status, with licensing for toy cars reportedly paying DeLorean's bills.

In conclusion:

So it would be fair to separate the conclusion in two parts: the car itself had already irreversibly failed, but it found a second life as a pop movie icon, and it still is to this day. Due to the similarities between Doc Emmett Brown and the DeLorean (as perceived in 1984), the car fit with the movie thematically, both in reputation (for Doc's character) and looks (for a sci-fi movie).

You can argue that for most people, the real car and the movie icon had little to no overlap for them.