IGN has a new hands-on with Zelda Phantom Hourglass from the latest Japanese demo.  They are very impressed with the visuals and say that the game is much better when you see it in motion:

In addition to the stylus controls, I was a bit worried about the downgrade in visuals from the GameCube to the DS. While the game doesn’t have the clean visuals of a GameCube game, it does retain the overall look of its controversial predecessor. On top of some solid cell shading, Nintendo has packed plenty of detail and animation into the visuals, and even managed to get 3D displaying on both screens during cinemas, a trick that only a few DS games have used so far.

Screenshots and online videos don’t do the game justice. See it running live on the tiny DS screens, and you may have to look twice to convince yourself that this is a DS game.

I can’t wait for this game!!  I hope we get a US and Euro release date at E3.