The visual fidelity of 3DS games is quite varied. There are a lot of games with a lot of different kinds of graphics. Quality included. Here's a kind of guide based on my own perception-
-Zelda OOT 3DS- about Dreamcast/early PS2 level graphics (the Link model is actually comparable to his Melee one though), subject to intense change, very early version
-Kid Icarus Uprising- firmly in the Gamecube/Wii level
-Kingdom Hearts 3D- probably about GC/Wii level (models and environments comparable to the PS2 games, but far smoother and richer in detail
-Super Street Fighter 4 3D- Wii level in terms of polygon count, but with modern shaders comparable in visuals to those seen in the PS3/360/PC versions
-Resident Evil Revelations- Wii level in polygon count, but otherwise the game actually looks identical to Resident Evil 5, lighting/animation/textures/etc
-Metal Gear Solid 3D- about the same sort of judgment as RE:R. Wii level character models but details are similar to MGS4
-Nintendogs+Cats- here's where there's very little change from DS. Models look about the same, but smoother and higher resolution. Animals now have fur. Probably early Dreamcast level or a bit better
-Mario Kart 3D- looks about the same as the Gamecube or Wii version, so there's the answer
-Starfox 64 3D- about Gamecube level
-Animal Crossing 3D- hard to tell, these games always look similar, looks similar to the Wii version, but since they never push the systems very much, i'd say Dreamcast level...
-Paper Mario- very much the same as the GC/Wii PM games, they never pushed the systems hard though, probably about Dreamcast level if you consider that
I'd say there are no games on the system shown yet (at least no 3D games) that would work on a lesser system than the Dreamcast. All of the games shown are much smoother than PSP games as well and don't seem to suffer from the system's grainy and pixelated textures. We've had confirmation from big name developers that the system is about on par with the Wii graphically (Miyamoto). And some games can take advantage of shaders that exceed even that. But for all intents and purposes, the system has some games that really don't take much advantage of its true power. So that's why you might say it has PSP visuals when looking at only a single game. But there are games that push the system hard, just look at Resident Evil Revelations or Metal Gear Solid 3D. Both games are even better looking than Wii games.
I can't stress enough though that Zelda is VERY early in development. The game will most likely look far better when it releases. I think it would be foolish to say even at this stage though that it doesn't look any better than the N64 version (it does, i can give you reasons too).