Ohhhh boy have I been wanting to sink my teeth into this one, though I'll try to be quick.
I wouldn't say Lunatea's designs are more simplistic per se, but it's not too far off. Let's compare two rather similar designs from both games: The High Priestess of La-Lakoosha, and the Songstress/Diva Lephise. To avoid unfair treatment due to the aging graphics of Phantomile's original iteration, I'll use a Wii remake render, which offers the same design.
The reason for Klonoa's iconic ears was due to a focus on one's silhouette, so let's start with that.
If you're working with a variety of races, silhouettes are EXTREMELY important, and this is where the simplicity really comes in: For the most part, Lunatea delivers the original's promise and makes silhouettes mean EVERYTHING. Nearly every single character in the game can immediately be identified by their silhouette, which are quite simple, or feature very basic patterns. Phantomile accomplishes this somewhat, but there is a lot of unnecessary rigidness or just general chunkiness, and far too much overlaps, making poses slightly harder to read
Let's move on to detail.
The Priestess has excellent flow, nice, clean, and vertical. Lephise on the other hand, is a goddamn
mess. Diagonal lines end abruptly, with the eye having to make sudden jumps to continue, and spheres are thrown in with no real reason. Of course, this isn't always the case -- many Phantomile designs offer the
opposite problem, having a total lack of detail, leaving the eye to wander aimlessly.
Ghadius at least offers a nice intimidatingly narrow silhouette. Take notes you awkward tellytubby.