Official Blizzard Quote:
Diablo: @bbcmilk We're focusing on customization through items as they can be seen better from how far away the camera is from the character.
Of course, the lack of facial customization is not new to the series, nor is the focus on armor customization. In both Diablo I and II, characters could not be customized outside of the 3 tiers of armor visuals. In Diablo I, this was very fixed, with light medium and heavy armor each featuring a fixed look. In Diablo II, this was expanded to have each limb change based on what armor was worn, in addition to the helmet changing based on what characters chose to fill that slot.
But, to compare what seems to be in place for Diablo III with the rest of the series, would put the past two titles to shame.
If we can recall from the original gameplay video, the Barbarian got an armor upgrade at roughly 5:20. Six pieces of armor drop, and each piece of armor is equipped to a specific slot. Each piece of armor also affects the look of the Barbarian. In Diablo II when a character equipped gloves or boots, they did not actually show up on the character, instead the chest plate determined the entire look of the armor (outside of the helmet and shield, of course). However, from the gameplay video we can see that even the boots and gloves, and a new slot reserved for leggings each fill a unique slot in the visual representation of the characters armor. Equip gloves, and it affects how your hands look, boots affect your feet, leggings affect your legs, and so on.
One more thing to consider, is unique armor. Simply put, will unique armor look like it's base item, or will it look like something else entirely? Now of course, this could result in a lack of diversity due to customization, since most people would deck their characters out with the most powerful unique items and leave it at that. Yet, unique items in the past games have all featured unique inventory sprites, as well as often applying a unique coloration to the armor representation on the character. I see no reason why this would be changed with Diablo III.
Which, brings me to my next point of speculation; armor and weapon dyes. Once more, I see no reason why these would not or could not be implemented. Back in Diablo II, magical properties and rare items would both affect the coloration of the base item. To put this into the hands of the player as a freely customizable option would be a wise, and undoubtedly welcome mechanic. Players would be able to not only choose the look of their armor through the base item, but further customize by way of dye.
Of course, the latter portion of this article is only speculation, but knowing Blizzard, they're cooking something up far beyond our expectations.