Gen III and Gen IV changed a lot of classic Pokemon's design and colors. Charmander is another one that changed. In the case of Mewtwo, his head shrunk and he got skinnier, his facial features also changed. The same thing happened to Red. He use to have a 'red' coat but now it's more pinkish and his hair is kind of a worn out color now. They actually were changed instead of just his shapes changing, as Red is wearing a different outfit all together.
Yea, his design has changed alot. I wouldn't call it bad (although I like both). I'm speaking a bit more on his art-style being different.
Like most Japanese artist (especially manga), overtime the uses thinner lines, and the better colors (although he got the pinks mixed up with red for Red). He also has thinned out as you pointed out most if not all of his bodies, for both humans and Pokemon, alike. Pikachu is a well known and notable example (although in anime and films, Pikachu has always been thinner than Sugimori's original art design).
