Several issues with your argument, here.
As it has been mentioned, this is still a fairly early build of 2.0. I know it's tempting to blow that off and think it's a fanboy excuse, but think about it. Detailed environmental effects are nice, but they will not likely be high priority unless they have some significance in the gameplay. This is what the video intended to show, and I would say that it hit the mark. Optimizations are still on-going, so I think this foliage fuss is unnecessary until we're actually able to get into the environment ourselves.
Secondly, it's a mistake to compare the rendering and whatnot to Xenoblade. Xenoblade is a single player console RPG. Its graphics engine does not ever need to consider the possibility of dated hardware (because the Wii's specs don't just magically change), nor does it need to consider the amount of mobs (player or otherwise) on the screen at one time. This was actually the problem with using Crystal Tools for XIV 1.0. They already tried this approach, and while I don't think anyone can argue that the game isn't pretty, the lack of optimization for online play and varied hardware has been one of the game's bigger detriments.
Also, the game may not necessarily be shown on its highest settings. While it would be awesome to see the game in action with as much anti-aliasing as possible, with depth of field and ambient occlusion, the reality is that there still may be many rigs that cannot feasibly perform well with everything cranked up. If they show it off that way, and someone with an older machine buys it with the expectation that it will look just like that, that person will be met with disappointment. It's likely they'll even wrongfully slam the game because of it. That's the last thing SE needs for this game right now.
Finally, there's not much out there in terms of HD screenshots. The only gameplay video we have was filmed with a camera phone. Converting pictures and video into a web-friendly format often means compression, which leads to a loss of visual quality. Now, add that to the fact that the few sources we have are mostly low quality to begin with, and I'm sure you'll be able to put 2 and 2 together at this point. I will admit that this is probably not as strong of a factor as my other points, but it's still something to consider.

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