That actually isn't true, it's just that for the vast majority of PS2 games, developers simply don't work as hard to exploit the graphics capability of the console. I cite Silent Hills 2 and 3, and Ico as games which absolutely could not have appeared undiminished on the DC.
The reason Shenmue II appeared on the XBox was that porting from DC to XBox was a hell of a lot easier to accomplish than porting to PS2, and Microsoft were taking a calculated gamble that Shenmue II would encourage XBox sales, particularly in Japan. This may have turned out to be a bad business decision at the time Shenmue II came out (if it came out now, I think it would do a hell of a lot better, because the XBox is generally riding a lot higher than PS2 these days) but there were sound reasons for doing it if they were going to get Shenmue IIx out on sale in a reasonable time.