HoMM VII Haven Units – Haven faction units from the seventh installment of Heroes of Might and Magic.

Is this still the same approach, or am I misunderstanding something?

But seriously, what kind of "revolutionary" graphical improvements would you like to see in Heroes 5? Normal map rendering? Or photorealistic graphics on par with your Unreal Engine?

At least at the level of 2008-2010, but not like in 2004 and then two years later without any changes except for a relief map, and in some places even worse. For example, in the alpha version, shadows take into account the alpha channel, and models are overlapped by shadows, while in the final version it only works if the alpha model has AM_OPAQUE set.