They could still write, that the elves in Divine Divinity are the descendants from the Old Empire/Nation/Kingdom we also saw in Dragon Commander, while the rest of Elvenkind has chosen to evolve a little bit into the treecreatures we see now.
It's strange because the rest of the races didn't change much from either Divine Divinity or Dragon Commander (lizards in DOS2, btw, look exactly like in Dragon Commander).
Elves though went from this:
To the picture up top.
Or they really retcon it. Happens.
I think so too. Personally, I can't say I'm a fan of the new look though.