1: The DS isn't responsible for games having cartoony looks. It has a screen resolution of 256x192. to demonstrate my point, here is an Oddworld screenshot lowered to this resolution:
Not a huge log in detail, especially for a portable version of a game. I'm sure, if it were a game tailored specifically to the console, that they could achieve striking visuals.
2: Compression. DS has a lower resolution, and as such, wouldn't need as much space to hold raw video/image files.
Currently, on the market, game catridges can hold a maximum of 2 GB, which is actually 200mb larger than the PSP's 1.8GB UMD.
3: Yes, yes it is possible, given it would be an FMV instead of actualy gameplay. Even ingame, it is still possible, as the DS boasts the ability to display decent 3D images (though, with most of the games on the market, this is not taken advantage of).
There.