I'm not sure you know what the means. 

I do.

You do know that there is a difference between a detailed giant track with 8 individual racers and a lot going on simultaneously and a tiny low res arena with only 2 participants with predictable patterns. Of course it looks better, because it is simply a lot less demanding than MK8 and as such they can incorporate more high quality assets.

We know that Wii U is capable of delivering 720p at 60fps. This game shouldn't be different considering the drastically reduced scope.

Your subjective perception has no effect on how demanding a game is. Also you may want to look back at some HD screens of MK8.

I think you're mistaking poor graphics for a conscious artstyle. The art style in Smash varies by level and character, with bowser you have lots of detail and bump mapping (similar to suicune), with kirby just some really soft specular detail (simular to pickachu). Some are highly detailed others are not. Pokken is essentially smash's artstyle but better quality textures, lighting and effects. I guess its the flat lighting you prefer?

I have a hard time believing that tbh

I'm not going to let this devolve further.

I've seen traditional 2D fighters running, at 60fps, on the Wii U. There's nothing that even slightly comes close to this. Look at Tekken TT2, a game made by the same exact company. It doesn't even come close to looking this detailed. It's not subjective perception. It's literally right there. Even I know that it isn't as simple as "well if it's 720p 60fps one one thing, it's got to be possible on everything!" Wii U is capable of MK8 at 720p 60fps. Definitely not what's shown here. I will gladly eat crow stew if that turns out not the case.

Assuming the final game runs at 720p/60fps, i see no reason why this couldn't run on the WiiU fairly easily. Smash running at 1080p/60fps during the 8-player battles is a much more impressive technical achievement than this (which is incredibly limited in scale, like most 1v1 fighters, and appears to be sacrificing environment detail for more effects).

For the same reason that 720p 60fps XBO/PS4 games can't run on the Wii U. There's more being put into the game to make it look that good. It's a more graphically demanding 720p 60fps than something like TTT2 or MK8. Unless you thing that those games running one better hardware, but maintaining the same resolution and framerate wouldn't still look lightyears better than they do now.

Are you honestly claiming that Smash Bros is directionless in artstyle because the Wii-U isn't the most powerful console on the market? If so can I claim the same thing about Uncharted (which looks lovely) because it could be done with fewer limits on PC? How about Little Big Planet or even Yoshi's Island?