Sonic 1 wasn't all that realistic...look at Green Hill Zone ffs.
I've not fully experienced Sonic CD, but what I've seen is quite appealing in terms of design.
But as for my favourite...I'm actually not sure. I do like the slightly abstracted style used in the earlier games, but I'm hesitant to say I think it's better than the more realistic environments used in the 3D titles (Heroes aside), because I think it was more a result of technical limitations (having to make a world based around such gameplay mechanics in 2D) than a real conscious design decision (though I could be wrong).
Then again you could argue that the more realistic setting of recent games is also not a conscious design decision: it's just going with (relative) realism because, well, that's how things are done these days, right? Although the space levels in SA2 (especially Final Rush and to a lesser extent Final Chase) kind of throw a spanner into the works with this idea.
The Mario games had more cartoony abstraction: just look at SMB3 and SMW. That I really like. It's also not been translated literally with the transition to 3D, but I feel Mario has remained truer to his roots (even Mario Sunshine had a cartoony feel to its environments, despite an arguable aspect of realism).
Uh, not sure where I'm going with this...so I'll stop before I go into a long ramble.
Good topic, though.
