Here's how I feel about the topic.
When I first saw the Zelda tech demo at SW2000, I was very impressed. Though the preset camera angles and such made it clear that it wasn't representative of actual gameplay (this isn't to say they weren't real time graphics) I was still really excited by it. Essentially, seeing this new watermark for graphics allowed me to imagine the world from OoT in the next generation, any gamer's dream. I'll never forget reading an e-mail from a buddy I met at Camp Hyrule, and seeing the picture of Ganondorf enclosed within it, with no explanation as to what it was. I followed the NP logo to their site, and boy, was I blown away.
But by now, the novelty's worn off. The general consensus with people seems to be that the graphics engine, as impressive as it once was, is now clearly outdated, and that the characters, now that everything's calmed down a bit, appear dry and robotic, lacking soul. I'd have to agree, though these types of things could easily by solved today, and who wouldn't want to see, say, Epona riding into a brilliant sunset, with each hair on her mane fur-shaded and animated, with clouds of dust whirling up behind her in real-time volumentric fog as she gallops across the gently blowing grass?
Still, after tasting cel-shaded Zelda, I don't want to go back anyways. Like Shocking said, there's levels of depth and realism that can be accomplished only with cel shading, levels of expression and personality that, with the same cartoony antics that allow them so much freedom, also make them that much more realistic, ironically. Link's world has never swelled and breathed like it did in Wind Waker, and there are things that simply would never fit in a world bound by nitty gritty details.
I trust that, with Miyamoto's guidance, we'd enjoy the game either way, though somehow I doubt he'll ever make a game as "realistic" as the tech demo. I think he'll only go as far as Ocarina of Time and Majora's Mask did, leaving for a healthy degree of lighthearted fantasy (and lighthearted, mind you, does not mean bright and colorful). It's just the feeling I get from all of this.
And by the way, I'm not some fanboy praising Nintendo on another awesome move made, I'm giving my true opinions. That's all there is to it.
Anyways, back to the REAL topic, I think it's pretty safe to assume that Tetra and the pirates will be with Link throughout his new adventure. They'll probably find a new country above the sea, one in distress. They'll investigate and find that some new villain is spreading trouble throughout the land. Link will go in, navigating perhaps the land's waterways and gulfs and such with his boat, and save the day once again. And then the Wind Waker epic will truly conclude, with everything resolved in the finding of a second Hyrule. This story could have millions of possibilities to it. Personally, I'd like to see Majora again, as well as tall, snowy mountains and lush jungles, environments not visited in WW...