Hmmm, well, those games (Mario) are old enough where there are probably a lot of people in Generation Y who habven't played them, yet the basic genere remains popular as do the characters. I can see why they re-released it, even if it is pretty stupid.
As far as "West Washing" goes, I think rather than the "Jello" option what we're seeing is evidence that pre-defined characters should be a thing of the past as they cannot appeal to everyone. Games like "Saint's Row 2" have demonstrated that with current technology it's possible to give the player both a highly customizable Avatar to be the protaganist, but
also have multiple voice tracks that can be selected from for the cinematics and dialogue.
People like differant kinds of characters, the Eastern/Western thing is just one stylistic differance (dress, general body types and apperance, etc...) and to be honest I don't think the tastes are locked in regionally, despite where each "style" originated. There are plenty of people in the US and Europe who like the whole eastern style, anime, etc.. and plenty of people in Japan and China who like western artwork, comics, and stylings as well. We're actually in a time period where western and eastern styles have been influancing each other more than ever and creating a lot of hybrids.
I think the direction the game industry needs to go in is instead of giving you say "Samus" to play, letting you design your own bounty hunter that looks how you want, and can select a personality type (affecting how dialogue is read and comments made in game and such like in SR 2). Heck, 3D Dot Game Heroes has shown that this kind of thing is possible even for games with a retro or "cutesy" style though voicework wasn't as prominant a part of it.
Such are my thoughts. Also I feel that if we manage to stop the whole Scwartzneggar Vs. Free Speech thing, and ACTA hre in the US, and then get the current people in power out of power and hopefully see a return to more balanced politics, you'll see people doing a lot less messing around with games, since I think a lot of the "changes" people are noticing both in art styles, but character personalities, are in reaction to politics. The US representing the biggest game market at the moment. What's more if the US gets it's act together hre, I think a lot of the rest of the world with censorship problems can be "fixed". I think we're seeing a lot of the current social/speech related issues around the globe because people figure that if the US is going in these directions itself (which have been there for a while, creeping up, only to burst onto the scene due to some political aberrations) it's not like we can yell at them for violating human freedoms with a straight face.
Ah well, enough rambling.