SE tends to use engines for maximum prettiness, I believe that was the case with the original FFXIV too.

Sure, it looked good, but as it has already been mentioned, it ran like crap and was a pain to work with. Yoshida was assigned as the director and he did his damnest to salvage what he could, but in the end 1.0 had to be put down to make room for ARR.

Graphics had to be toned down quite a lot to make it available for a bigger audience and actually put together something functional, such as decent game mechanics and maps that weren't 90% copy-paste grid.