Much of the reason why I like Game Freak is because, while most of their games sell millions of copies, their games have a "made by a small company" charm. Various reasons why I think that, from the stylistic choices in their games (simple pixel art style) to the gameplay choices (the grid-based layout in Pokemon).
Seeing this amazing, cel-shaded 3D game with top tier graphics would kind of ruin that for me. I'd rather not see Game Freak's style die than to see Pokemon "evolve" in this way.
While I agree, it's still possible to invoke a quaint art style in the overworld if they went cel shaded (heck, cel shading is probably the
best way to preserve it in 3D.) Full analog control would instantly bring in a lot of lapsed fans, I feel, and it's something I'd like to see happen too. The game would instantly become a lot more free and open, which suits the ideals of the series, I feel. I'm imagining a Pokemon that takes cues from the Zelda DS titles, with the overhead view. There's no reason that couldn't work for even the Gen 4 games, considering how those are full 3D in the overworld anyways.
I'm split on sprites vs. models in battle, though. Right now I'm siding with sprites, but models would make better use of the 3DS. Even still, there's no options for preserving the quaintness in battles if they switch to models (as opposed to the overworld.) With the overworld, Game Freak has basically 3D-ified everything already except the characters.