I have played both (well, OK, I've played 99 Nights...but watched someone else play Ikusagami).
N3 does look better, no doubt about it, but it makes an interesting comparison anyways. N3 has a poor framerate (~30 fps with hardcore tearing), extremely stiff and rigid animation (could improve, though), and still limits the draw distance. Of course, the models are all *MUCH* more detailed, the depth of field effects are beautiful, and it's 720p.
I could see where Ikusagami was taking shortcuts, but who really cares when the end results are as we see? It's amazing as hell for PS2.