It's very pretty and hopefully will be appealing to the XBLA market. I think it's a smart move to go with the painterly graphics instead of the pixel art. It'll be much more appealing to the average user, and hopefully give the impression of the current Spelunky being an older, obsolete version. It would be disastrous if potential buyers realized there was a perfectly good free version floating around.
Best of luck to Derek and his crack team of ninja coders.