It's probably the first game period to use bloom lighting, HDR and tone mapping. All in a more primitive form that they are done in games today, but it was (to me at least) a clear indicator where the game visuals will be heading in the future. The game was also among the first I know of to have such extensive particle and post process effect use as well.
And yeah, it did fit on a 700MB disc. The sound was lower quality and some textures in this remake are higher res, but for the most part the game looked like that.
I think the controls are fine btw, very smooth and responsive, and with effective animations that accompany them, such as characters leaning into the turn, etc. Placement of jump button is odd, but other than that I think the game controls better and has better visual feedback to control than most games made today. Compare it with something like Brutal Legend which I played a bit the other day, and is kind of a norm how many 3rd person games control, I think Ico controls better, and offers far better organic connection between the character and the environment. In most 3rd person games characters feel like they are inorganically bound by some invisible lines that just happen to be close to the walls and the objects in environment. In Ico this was not the case at all. Characters react to even the smallest bumps on the ground, have independent leg levelling, touch the wall with a hand when they're close to it... Very few games even today do this sort of thing well.