I'd wager it's live action,
heavily post-produced, clearly. A friend of mine shot a music video like this where it was seen as an animation created by torn photos collaged together but actually the images were shot as separate elements and expensive post was used to make it look like it was animated.
Cheats.
(edited because I misremembered the video - now posted above)
(, Wed 22 Jul 2009, 0:41, Reply)