There's a few things I'd like to see in the update, and here they are in order of importance for me:
Lighting: This is huge when it comes to computer graphics. Fortnite's UE5 update is proof that you can have really basic assets but if they're well lit, it makes a world of difference. There's places in XIV that frankly are lit horribly. A lot of time is spent in the Ocular in ShB and everyone's face looks so weird, and that's just the most prominent example I can think of at the top of my head. This is gonna be huge for the game.
Better Antialiasing: The current implementation is just not great. Good antialiasing can help even low quality textures look rather nice at a smaller loading cost. Add it on top of nice textures and that's the next step to making the game look much prettier.
Foliage: This will make open environments looks so much prettier. The example they had in Elpis blew my mind. That's one I'm excited about.
Textures: Most textures right now are... fine. They're serviceable, particularly if you're looking from a distance. Better AA will help some of these look better. Get a little closer and some just look really poor, particularly in older areas. I think there's room here for improvement.
Character Triangles: Just with better textures and lighting, the current models would look way better than they do right now, and this is why this is the lowest for me. Avoiding sausage fingers and N64 feet are the big change I feel these characters need, though I think this engine can push models with the quality of the ones 1.0 had and even better.
Good graphics aren't a shallow. They're part of the artistic vision of the developers. They let us be more immersed, and there's no reason not to improve on areas that were limited by a PlayStation 3 of all things. As long as the options remain flexible for all kinds of PCs I think this can only be an improvement.
We'll see what comes out from this in the end.