guys... GUYS...
it is 100% confirmed to be real time in-game engine!
http://twitter.com/bungietweets/status/6616587410
reachs in-game engine has a CGI look which looks better than halo 3s real CGIs.
this is a major improvement! actually, the game will look the same as in the trailer just with BATTLE-ACTION on a very big scale with a lot of special effects. which means = it will look even better in action than the trailer.
also to the other guys comparing it to UC2 and KZ2...
my impression:
animation: they are awesome on all 3. one game has to be halo, the other has to be KZ2-drama and the other is just awesome in every way.
frames: goes difinitely to Reach. the game does look much more smooth than the other 2 judged by the trailer - which is the most important thing for a fps.
character models poligon-wise: goes to UC2. then comes reach and after reach comes KZ2.
character models texture-wise: goes to UC2. then comes reach and after reach comes KZ2.
character models shader-wise: goes to Reach, then comes KZ2 and then comes UC2.
ground textures: goes to UC2. Tie between KZ2 and Reach.
environment athmosphericl effects (like dust and wind): goes to KZ2 then comes Reach and then comes UC2. this is all judged by 1 trailer. i still doubt the effects will be as good as in KZ2.
special effects: goes to KZ2 with UC2 a little behind. we dont know anythiing about Reachs special effects because we havent seen any battles.
lighting: this one is a hard one and is very much depending on the art-style of each game. all 3 games did a great work here. in Reach you get the CGI-like feeling and the reflections on the spartans-character model is very realistic - its still your Halo-looking game though, which one like more, another like less. in UC2 you have a completly different art-style and the strong lighting fits it very good and is almost perfect. KZ2 uses a completly different render-and lighting engine which gives it a completly different feeling and an overall completly different graphical appearance. design-wise i would give it to KZ2 then Reach then UC2... but thats just me.
CGI-like appearance: all 3 have it in different ways. the games feature 3 completly different worlds. Reach looks a lot like CGI while still managing the Halo-style. KZ2s CGI appearance is all due to special effects and spot-lights in combination with the darkness and not so colorfull world. UC2 is the complete opposite from KZ2 with a lot of colours and strong HDR lighting and it looks even better.
Overall: lets ask some questions here: does Halo Reach look like CGI? yes it does. Is it still featuring the Halo universe/art-style? yes it is. Does it look great for what it is and for what it tried to be? of course. Does the same apply to UC2 and KZ2? yes. all 3 games did an awesome job in delivering awesome graphics for their respective worlds/designs/art-styles/whatever.
NOTE: this is all based on my opinion, because we dont know any specific numbers of polygones and pixels.