Watercolors were based but you can understand why Sugi changed to more plain styles when you remember that his key art was being used as assets for everything worldwide, and needed to be easy to make out in all kinds of sizes and printing scenarios
Even as early as the TCG's Gym 1 set in 1998, Sugimori had new compositions coming out that used other techniques, digital ink and pencils similar to what you'd see in Gen 3 and 4.
However they kept the watercolor aesthetics in Gen 2 game art likely for consistency, which I like because especially for the Pokemon, it gives the impression of a sketch artist filling out his zukan by hand.
