I love the CGI in the games, but I don't think it would work at all if it were to be throughout the whole game. But then I wonder how they would go about improving KH's graphics without taking away that style the game has, while also making it look suitable for a console like the PS3.
I'm don't know about tech and gaming design etc. but i suppose they'd use higher polygons, characters, textures and stuff like that. Maybe some lightning effects? maybe some cel-shading?
In any case KH isn't the most advanced in graphics. It uses a unique flavor in the graphic department which is really welcome.
You know they might have in store an engine especially for KH or they might modify the luminous engine or the crystal tool?