I just came across this newer game called Bastion which has some pretty awesome painted graphics. It reminded me of some super old games from back in the day that featured hand painted environments. I guess any video game is "painted" or "sculpted", but these have a real organic look to them. I've never played any of these games, but the screenshots are nice to look at. I've also included a couple pics of the levels from the game Metal Slug, which are kind of more pixel-arty but awesome nonetheless.
In order of appearance, Bastion, Legend of Mana, SaGa Frontier, Metal Slug.