Firstly, it wasn't Miyamoto's choice to change the art direction. As you all know, the Zelda game that was in production for the Cube was using this style. Secondly, that ISN'T FMV, that is all done in real time, and those character models were being used for the Zelda game before the change.
Lastly, it DOESN'T look crap. it still looks amazing. But the toon-shading is just as pleasing to the eye IMO, and I couldn't see TWW using any other graphical style. I think I haven't seen anything as graphically impressive as the Toon-shading in TWW in any game released.
That doesn't mean they couldn't have made a Zelda with the SW2000 look
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