Nintendo explains why they moved away from the realistic Legend of Zelda design in their Spaceworld 2000 footage

The following comes from the Zelda: Art & Artifacts book, featuring interviews with Yoshiki Haruhana and Satoru Takizawa...

AA: Before we get into how Toon Link came to be, let’s talk about the promotional footage from the 2000 event. It featured a realistic Ganondorf and Link fighting with each other. The footage was created by Haruhana-san and Takizawa-san, correct?

Haruhana/Takizawa: Yes.

AA: And everyone who saw that footage believed that the new Zelda title coming out for the GameCube would be realistic looking. So tell us: what happened?

Haruhana: Well, as we created that footage, we came to the realization that the realistic route wasn’t the way to go.

Takizawa: [nods deeply]

AA: So it was creating that footage that made you realize the realistic route wasn’t the right course?

Haruhana: That’s right. We were asking ourselves, “If this the right direction to go? and “Does realistic equal a good game?” At the time, as the console’s hardware specs went up, many games were heading in a more photorealistic direction.

AA: They were.

Haruhana: And, at that time, when I was flipping through a game mag, all I saw were really similar-looking games, and I began to worry we would be making one of them. So we thought about what we needed to do with our art to make it stand out. How could we make the readers of that magazine stop and look at our project? We decided that making a realistic Ganondorf and Link wasn’t it…

AA: So you felt that a realistic-looking Zelda would be lost in the sea of many other games?

Haruana: Right. So we cleared our heads of everything and thought about all the other games in the Zelda series. Toon Link came out of process.

What ended up happening with that tech demo may have been for the best. Wind Waker is very much appreciated to this day, and Nintendo did follow up with Twilight Princess a few years later.