There you go, you learn something every day. I had no idea ICO was originally a PS1 game. Turns out it was, and that the demo reel makes it look 10x better than anything else that turned up on the original PlayStation. From an old, but still interesting history of the game's development, check out this piece that's hidden deep in the 1UP archives:

September 1999 marked a turning point for the project. Ueda wasn't satisfied with the results they were achieving, and became frustrated that the hardware wasn't capable of realizing his initial vision. He considered three options: either canceling the project outright, altering the design to try and finish the game on PSone, or changing platforms. After some deliberation, the team began converting the project for the PS2 hardware. It had a dramatic effect on the project: their graphical problems were over, with a new engine capable of 60 frames per second, particles, cloth movement, and a unique lighting system.

ICO Playstation One Beta Video [Gamebrink]
The Method of Developing ICO [1UP]

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