Remember "Paper Mario", "Pa Rappa the Rapper" these were cool flat 2D looking images that lived in a 3D space.

These were just very flat 3D models with a Cartoon texture. The effect is very cool.

Animating spites would be a pain and take up way to much memory. I would use a flat 3D model and take advantage of all the tools the 3D engine offers.

The new Zelda / Link game on the game cube is going for a Animie look in 3D. This is a very popular and cool art style in games right now. A direction worth pursuing for an A5 developer.

Just my two cents worth.

Ken