I don't know what the problem seems to be with more detailed graphics in general. Unless the gameplay code is somehow inextricibly tied into the graphics in arcane and mysterious ways, it shouldn't take a huge amount of time to migrate (Creating models may, though). Movements won't have to be particularly altered, just having an animation play of the person running/walking across the square in question (Diablo did it, for instance). The view would stay the same, viewing one level at a time in a coss-section style, with the added benefits of seeing exactly what was below that indiscriminate polkadot/blue haze, as well as being able to zoom in and out and wander through your own fortress corridors.
I've played in a game using this particular engine's predecessor, and would say that even Cube 1 would be perfectly fine for DF, assuming it were compatible. As for the characters, I imagine they haven't done a lot of modeling for them, as they don't really show off the shiney engine. DF, at the moment, is not in true 3D so much as layered, just as in most games, where you aren't really inside a building so much as in a seperate zone that represents the inside.
People seem to assume that gameplay and graphics are somehow mutualy exclusive. With a one-man building crew, this is pretty much the only situation that'd hold true at all in, which is why I rather wish the dev would outsource the drudge work that doesn't have a shot at making the game any more personal (which would include the labor-intensive part of a graphics upgrade) to other freelance game creating souls, who'd be plenty happy to help. Call me insane, but I think his time would be better spent on the nuances of armies than doing code patching that anyone with a coding guide and some spare time could do.
Last off, for the not-insignificant aspect of imagintion... I really don't see how making the graphics more detailed somehow disables one's imagination. It'd be around the same as insisting that whenever you imagine your fort, it's all inhabited by little smiley faces instead of dwarves, and all the walls are just perfectly smooth funny blocks, and the water is a couple ~ signs stuck together. We already know we don't need to settle for what the game gives us in terms of appearance. While graphics need not be a huge priority, I don't see why people are actively hostile towards them.
Of course, I hope the dev doesn't just drop everything and move to 3D migration (the true representation goes LAST in game creation, if I can gague properly). Then again, I'd also hope he'd outsource the things that can't be used for a creative bent to other people.