http://en.wikipedia.org/wiki/Shenmue_II#Differences_between_the_Xbox_and_Dreamcast_versions said:
The graphics were improved by the Xbox's more advanced hardware (bloom lighting during the night hours, better looking water, among other features), the lengths of the load times were slightly reduced, Dolby Digital 5.1 support was added for the game's cutscenes, and the frame rate now ran at a much more consistent 30 frames per second with less loss in characters on-screen (the Dreamcast version used an aggressive character LOD that caused pedestrians to fade in and out of plain view in very crowded scenes). This was all done without many sacrifices to the original game design, with only one instance (the Worker's Pier,) of noticeable pedestrian reduction from the Dreamcast version. The Xbox version also used Quincunx Anti-Aliasing (like many Xbox games) and although the technique reduced "jaggies" associated with aliasing, fans are generally split down the middle as to whether this and the new nighttime bloom lighting effects hurt the image quality in the Xbox version of the game giving it a somewhat "blurry" or "washed out" look.