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I realy don't see why you guys doubt that a current engine correctly configured and polished can't give a rendering that is better then what they used back in 1997.
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Because realtime rendering is something completely different from pre-rendering. There are limits to how much you can render in real-time. Polygon limits, amount of textures that need to be loaded, lighting detail, shadow detail. All that stuff.
In a pre-rendered scene you could fill it up with details and make it look lifelike if you want. The final image would maybe take a couple of hours to completely render on a high resolution, depending on computer power.
Rendering a same detailed high res scene like that in real time is near impossible, that's the point I'm trying to make. You'd have to cut a LOT of corners to make sure the scene is rendered properly in a timely fashion.
I guess the best example I can give of this is Donkey Kong Country Returns. The original games had some awesome and 'detailed' backgrounds which were pre-rendered just like in AO (with smooth scrolling, might I add). In the new 2,5D version the backgrounds look a lot less lively to me, nowhere near how they used to look.
But hey, I guess we'll see how it turns out if you do decide to go with realtime. I really hope I'm wrong on this one.