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Gallery of official artwork and character pictures from Xenoblade Chronicles.
www.creativeuncut.com
I think there's a misunderstanding on what a redesign actually is. All of the characters went through iterations before release, but their finalized forms that are represented outside of the game are still their concept art. The comparison between the in game models of XC to DE is a bad one, because they were not redesigned much, if at all. They are much closer to their original, official artwork. And sure, the Wii was capable of cel-shading, but I'm not sure it would have been able to make the characters look quite as good as they do now.