In fairness to the Quagga Project, there's nothing to say the funds would go to conservation if reallocated. I've no idea where their funding is from, but it may well be corporate sponsors or goverment resarch funds - in which case it would probably not be used directly for conservation if the Quagga Project were to be stopped.
In any case - the argument of 'there's better things to spend money on' is a bit of weak one, in my mind. Where does it end? We could spend loads on conservation with money spent on (say) the Queen's Birthday celebrations for a decade, or the Olympics, or the Arts Council budget, or the European Space Program. But we do these things because humans get pleasure from them, or they broaden our understanding, or encourage development in other areas (education, employment...). In any case - there's plenty would argue that the money shouldn't go to conservation anyway, but used to fight poverty in southern Africa. And once you have that argument, why spend money repairing city roads when people are hungry? Why spend money on public schools? It's an endless argument. There will always be massive amounts of money spent on 'non-essentials' such as these, because the cultural benefits are there.
If there are scientists interested to see if they can breed something close to a Quagga and they've bene able to fund it then I say power to them.