Part of it is the burned textures, part of it is the doll-like characters. I liked, say, the KOTOR engine for character rendering better than this one. For one, UE3 characters have immobile shoulders, which makes their gait odd. Not that UE3 was ever known for its well-rendered characters.
It's definitely set a new standard for environmental destructibility, though. The parts in the demo where you can shoot propane tanks into TVs which fly out and brain people, or shoot out a ledge full of crates onto a gang, are glorious.