And thus did BioWare's own Senior Community Manager Stephen Reid appear on the scene to clarify what exactly was happening. The low-medium-high texture quality scale is, he says, a bug, and the medium choice was never supposed to exist. So yes, the game has only two sets of textures, low- and high-resolution, but even the high-resolution textures don't look as shiny as the ones featured in SWTOR's cutscenes. And so the chorus repeated, "WTFM8?"
Reid drops a ton of technical information to explain why players can't run around with conversation-quality textures 24/7, but the fact of the matter is that an MMO could potentially have anywhere from one to who-knows-how-many people on-screen at any given time, and BioWare "discovered that using [...] 'maximum resolution' textures on in-game characters during normal gameplay could cause severe performance issues, even on powerful PCs."
That's the short of it, but if you'd like the full, unadulterated technical breakdown, just head on over to the official forum post for more info and screaming.