it was simply outdated and not what a standard AAA ps4 game should look like.
Stylization is a thing though. See the KH's fairly modern
deceased mobile games. Yes, not AAA, I know. But, if Square had chose to do so, they were within their rights to keep the same style as the PS2-era, but punch up the fidelity as they do with their renders (perfectly rounded, separated fingers, smooth on the nailbed, add more points of articulation to hair, facial expressions, etc). See the myriad other recent games that just make minor adjustments: Tales of series, Pokemon, Mario, etc. Personally, I think it's a style that lends itself exceptionally well, especially to the original 2D animated canon. What's done is done though, and I'm not upset about the new look. I see the technical achievement. It took some adjusting for me (particularly in the stages leading from 0.2 and up to release), but I think it's fine. I could have seen them close out the saga with the older style, though. The models they made for KH3!Sora & Kairi in MoM looked great. I think the grand finale and being launched two consoles after II is what made the graphical shift take precedence. Thematically, it made sense to do it too, as the worlds, for the majority, were based off computer animated properties.
KH3 looks amazing imo. KH4 gonna look even more insane on ps5 and UE5.
There are definitely going to need to be graphical overhauls for KH4, due to the "realistic" nature of Quadratum (and potentially other worlds). I do think IVs trailer looked pretty great and I'm excited for that "type" of KH when it rolls around, but I think my issue with III was that it was a weird in-between. While the characters looked at home in cartoon set dressing in 1 & 2, there is an uncanny valley, rubberized look to them in 3. I think maybe I had issues with some of the textures.