Being published by HotB, releasing April 26th.
Some screens:
More can be found here, along with a 2 page preview from IGN here.

Source: http://www.gamespot.com/ps2/rpg/graffitikingdom/factsheet_6119681.htmlGraffiti Kingdom is a new 3D action adventure game from leading Japanese developer, Taito. Nominated for "Game of the Year" in Japan by Media Arts, the game offers players of all ages an opportunity to let their imaginations soar ... dream it, draw it, and play it!
Players will take on the role of Prince Pixel, who is on a quest to save his parents and restore Canvas Kingdom back to its normal form after an ancient evil transformed it into a labyrinth full of danger. On his quest, the heroic young Prince finds a companion, 'Box Dog', who aids and accompanies him in his many quests. At the start of his adventure, Prince Pixel finds a magic wand that allows him to bring anything he draws to life. The wand also enables him to temporarily take the shape of any enemy encountered and learn their powers. Prince Pixel can become anything the player draws and transform between three additional different creatures at any given time.
As Prince Pixel advances through the game, he gets stronger, tougher, and more skilled. Players also benefit from experience by acquiring more drawing tools and abilities. By the end of the game, players can literally re-create any creature that they've seen in the game with an incredibly easy-to-use drawing program. The game allows the user to draw straight lines as well, so even someone with no drawing skills whatsoever can create just about anything. Players will use their imagination to battle their way through levels or creatively solve puzzles.
Graffiti Kingdom allows anyone to convert simple 2D shapes into customizable 3D polygonal structures. The user can modify the polygons by coloring them, drawing textures on them, making them transparent, defining their role, and adding attacks. The parts are joined to create a fully playable character. Once converted, the 3D characters can animate, bend, stretch, flatten, and even talk!
Features:
Play as or modify over 220 fully customizable characters ... or create your own unique character(s)
Level up by collecting medals obtained by defeating enemies or find them hidden in stages
Select from 160 different attack moves
Store up to 144 original characters on one memory card
Swap between three different creations at a time
Possess enemy characters; learn their powers and moves
22 action-packed levels with vibrantly colored interactive environments
Boss fight battle mode
Two-player mode - Battle your friends or trade creatures with them
Over an hour of stylized FMV's from Hayao Miyazaki's Studio, creators of the highly acclaimed theatrical animation releases, 'Spritied Away' and 'My Neighbor Totoro'
Some screens:
More can be found here, along with a 2 page preview from IGN here.