LOL, Taz come on, how can you say the characters arent 3d?
I had the demo, THE CHARACTERS ARE 3D. Whether they are hardware accelerated or not I dont know but the characters are made out of polygons... you can tell in the screen shots that there are polygons.
Same with the Longest Journey, its Direct3d. The important characters (and any that move around the screen) in that game are 3d models and when Anti-Aliasing is enabled, they are smoothed out.
EDIT: Screen shots show polygonal (pointy) models with blurry textures and smooth shading... non-3d objects (usually sprites) would have pixelation on the edges and would not have blurry textures (because prerendered objects always had more detail than models until recently).
Here is a line from the gamespot review: "It's the first from the company to dispense with traditional 2D animation and move to the more cinematic 3D style"
note in the system requirements, it says 3d Hardware Acceleration is supported.....
EDIT3: In the video card section of that site, here is a bug with a certain card in hardware mode: "Whenever Manny talks to Glottis, Glottis' teeth will be corrupt and may look like they are not connected to his mouth. " This would be impossible if the character was a 2d image because obviously, the teeth are a seperate model (or else they wouldnt have a specific problem). Also, a super high res sprite with millions of frames of animation would have been impossible in 1997 (especially when hardware acceleration is enabled... video cards have a hell of a time with lots of sprites now... just imagine a Voodoo 2!) and is practicly impossible now. At least the important characters in Grim Fandango are