This trailer was made pre-alpha, and the alpha graphics are not even finished, so yeah, the graphics aren't as good as they are currently. Well, I'm talking character models, anyway. The scenery isn't worse than what there is already (shadows are very nice by comparison) and I haven't taken a good enough look at the NPC's.

Yoshi and his crew haven't wanted to release any of the videos they have so far but have felt pressured to do so by the community (and perhaps superiors, not sure) who were crying left right and center on the back of every released non-gameplay video earlier in the year. The bonus of releasing this video is that now the community are much more interested in giving the developers time to get things ready instead of putting too much pressure for a quick release.