The bad part about doing custom painted portraits is when you upgrade them with new gear or buff them with sparkly effects, it doesn't show. I'm with you that painted portraits generally look better, but in a game like Elemental where separate pieces of gear is much more common-place, I prefer it to be real 3d models. I want to see my character evolve, just like I would in a real RPG, and not just see some numbers go up like I would in an older fantasy strategy game. Nothing is more immersion-breaking than when I put on my wizarding hat and robe and staff, and when I get into combat I'm suddenly wearing a plate helmet, a shield and a mace.
I would like evolving character portraits too, but I'd rather see awesome looking 2D MtG style stills (or even the variety of MoM's pixellated mugshots for the matter) then animated but comically ugly 3D closeups.
But I'd support having evolving 3D portraits if they could improve the level-of-detail of the models and textures in the character portraits so that at least the facial profiles are better represented, and/or find some other way to make them look more fearsome and epic.
Currently what breaks immersion more for me is the fact that the drama of the backstory and flavor texts isn't complimented very well by the picture of my pathetic looking sovereign holding a club...
You mean to say you don't find this even slightly annoying also?
EDIT: Attached an example pic that speaks for what could be...
Awesome and evil looking sovereign adept in death magic and war: