I still think the really posterized look of Novastorm isn't that preferable (especially with what seems to be a fixed palette). I really think more dithering would have benefitted it overall (especially with the amount of blur on composite video).
If it wasn't for the gaudy colors on some of the sprites and really bland (or even nasty) looking sky, I wouldn't mind do much... except the super posterized live action segments.
I'm pretty sure a lot of people would have preferred live action even with mediocre actors (many were no worse than voice acting in CGI cutscenes anyway). But animating humans was one of the worst examples of early CGI (for cartoonie stuff or sci-fi it was OK).
The posterization looks OK in some cases, but it can be really had to pull off properly in other cases: Myst for example. That would have been interesting to see had they completed it. (from what I recall it was rather heavily dithered) I'm actually more partial to Return to Zork myself, though that wasn't as well recieved as Myst.
There's always compromise between dithering and thresholding (posterization), plus better dithering techniques too. I personally find dithering usually preferable unless the game specifically used pixel art for the start anyway, but any such cases usually used buffered animation (sometimes streaming+buffered) and not FMV, like Popful Mail, Chuck Rock II, BC Racers, and a lot of lucas arts games. (all the animation in X-WIng is buffered I think, I think most or all in a lot of graphic adventures is too, like DOTT or Full Throttle, even Rebel Assault used a lot of that in addition to FMV, as did return to Zork -the typical minimal facial experession and lip animation overlaid onto a static image of the character's face, and similar -there are several cases of actual cutscenes, but less common -especially in the floppy disk version)
Still looks a hell of a lot better than Rebel Assault, that game is just weird in the manner potimized both for the PC and then again for the MCD. (the palette choices, poor compromises to maintain a higher resolution/screen size, bad compression artifacts, etc)
The odd art design is not all that detrimental in the long run, just a bit curious.