People. First off, character models in xenoblade were awful as well. The engine of the game is made for gorgeous environments, not really good character models.
What was shown in the trailer was all CGI cut scenes. In Xenoblade, the cutscenes were notoriously bad. What we saw was not indicative of gameplay.
The game still looks great based on the treehouse demo. The game we saw in earlier demos is still there, as good looking as ever. Go watch, and behold.










