Take a look at LittleBigPlanet, Fable 2, BioShock and Viva Pinata. I can just as readily classify the majority of Japanese creations as big-eyed cartoon characters or cyberpunk teenagers with weird hair in psychedelic environments as you can claim all western titles are grey and dirt and bald space-marines! Those are the prefered games of western developers, requiring an art-style that suits the genre. It'd be plain stupid to have the next Halo go for characters more akin to the next Square-Enix creation. Similarly most Japanese created titles are in genres that benefit from the art style you clearly prefer and would look stupid with western-style space-marines.
Your examples are weird. I have never ever seen Fable 2 before until this thread and unless I'm looking at the wrong screens, that game is the very definition of generic. I thought I was looking at Oblivion (I'm looking at screens from Gamefaqs). Bioshock has a mix of generic elements and a unique art style, while Viva Pinata's just drawn by some of the worse artists out there. It does look different, there's no denying that... but different in a bad way (see Street Fighter 4). Rare's character designs always looked something out of a cereal box. LBP is a good example and stands out. It is one of the rare cases.
The description everybody uses for Japanese characters is actually a very funny contradiction. The cyber punk thing is a new one, but the hair and psychedelic environments is what makes each and every character unique. You can tell a character apart just by their silhouette. To come up with wild hair is to use your imagination to come up with something never seen before. That doesn't always mean it's good (like Yu Gi Oh), but to say something is weird while calling it generic is a big contradiction. The same can be said about psychedelic environments. It's easier to come up with something based on reality than to come up with something no one has ever seen before.
Let me use your example of Japanese character in an American game.
What if I took a character from Final Fantasy Tactics and stuck him in Final Fantasy XIII. It still wouldn't work due to the different art style. I'm using two slightly varying series from the same company to make this example. Hell, even Cloud would look out of place in DragonBall Z. His emo angst demeanor would completely stand out from DBZ's comical lighthearted style.
Now, what if I took Shepard from Mass Effect and shoved him into Resistance 2? Ask yourself this and honestly answer it: Would Shepard look out of place in it? Remember, my previous example was two similar series from the exact same company against 2 different characters from 2 different companies in 2 different genres.
I expect most people would agree. However, this thread is highlighting the point that you don't have to choose between one or other! If Japan has the art down pat, why aren't they progressing the tech as well?
Yeah, that's what I forgot to post when I wrote that sentence. I was trying to say that with big budgets required for tech and game development in general, something needs to be sacrificed. In Japanese game developer's case, they either had to skim on tech thus the lack of surface shaders.
If we talk about pure person preference, I have no problem with that. You can't please everybody, you know.