Well it looks like it's using HDR lighting, that alone puts it above KZ2/3's.
Bad IK by design? LOL.
The second part is better:
http://www.youtube.com/watch?v=KGUVM4gehD8
The good stuff starts at 0:40 (Geomerics-like indirect lighting/shadows).
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BTW, where are you guys getting that the Zelda demo is using realtime GI? It could be just regular baked lighting with light probes for the characters and point lights for the torches.
http://www.youtube.com/watch?v=iD2lmN3RdEA
The day night transition is a load screen, no realtime changes in illumination occur in the video.
The GI in CE3 works OK only for very low-frequency lighting and is calculated for the sunlight only (it's not used in the console versions of Crysis 2). Also, the "glossy reflections" part of their LPV solution was dropped :/
Fortunately the engine supports image-based lighting (it takes only a second to bake the HDR cubemaps needed for it) which is a world of difference compared to the crappy uniform ambient lighting in CryEngine 2. Plus you get consistent HDR reflections too. No indirect shadows, though.