You shouldn't compare Okami and KZ2 directly because they have different art direction. One goes for super realistic and the other goes for creating a world that looks like it was painted on. The fact that one is less technically demanding than the other is mostly irrelevant.
As an example of what I am talking about in a more general sense I will refer to one of the Ratchet and Clank games (for those that don't get what I mean or disagree). No, I can't tell you which one exactly because I don't play them. Anyways, there was some extra trophy room like thing where they show off ideas they had that didn't make it in the game proper. One of them was super realistic water. If they devoted the everything the PS2 had they could make one square of realistic water. They had to disable everything though and that includes all the gadgets you normally collect. Was that one square of water the best graphics in the game? It was clearly the most demanding, but not really that much to see.
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