Kids ride no idea If what I remember was real

VR pods like that definitely exist. There was an arcade in Reno I used to frequent that had them.

Whether or not ALF was in one, I can't tell you, but that'd be right about the point where the nostalgia factor for the show started to kick in. He made a lot of odd official cameos (read: actually performed by Paul Fusco) in commercials, talk shows, NBC's 75th anniversary special, etc. and the DVD box sets were first released in the mid 2000s. This page doesn't mention a VR ride or anything like that, but I'd say it's definitely possible.

en.wikipedia.org/wiki/ALF_(character)