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Mr Puggsly said:

I don't understand whats happening in the picture. It looks like he's being smashed or something.

Either way I'm still reluctant to believe its a 2D model. But I'd be impressed if we can confirm it really is.

The game starts to "BUG" when you move the camera around Donkey Kong and then it has no Idea where to draw the character. Because of this, Donkey Kong strats to "float" around depending on the angle and height you look at him  this is why it looks like he is inside the stone.(you can see his shadow is still on top of that stone thing)

It is a 2d character because its just some sort of flat image that becomes thinner and thinner the more you move to the side untill it gets invisible.