The sprite-based games of old certainly gave wide latitude for how you choose to interpret the character designs. It doesn't surprise me that at that time they would've chosen to supplement the sprites with western-style art designs for a western audience.
It's in the same vein (but not quite as hilarious IMO) as what they did to Breath of Fire II's art.
It's a miracle that the NA cover art for Ico came out so beautifully (EDIT: somehow I confused the beautiful Japan/European box art with the NA box art. The NA box art is horrible)
JP cover art: https://en.wikipedia.org/wiki/Boku_no_Natsuyasumi#/media/Fil...
Hypothetical NA cover art: https://pbs.twimg.com/media/Flpj2mWXwAQY_dI.jpg
It's a miracle that the NA cover art for Ico came out so beautifully (EDIT: somehow I confused the beautiful Japan/European box art with the NA box art. The NA box art is horrible)