Enemy bodies instantaneously start fading out when killed. Is it possible to disable this?

Sadly not. It is a rather shoddy Console port and teh XBOX was not the most pwoerful of consoles.

I remember this being asked in an interview around the time of release. The dev said something like "Sorry, this is a technical issue that can not be fixed". The game is probably hardcoded to fade out and remove corpses immediately after the death animation finishes or else someone would have found a line to tweak on the PC.

My guess this is an ugly solution to a problem that may have only been present in one or a few situations (perhaps not even on the PC version). Instead of fixing these situations, they just made it an engine-wide solution and have the bodies fade out quickly throughout the whole game. The game was delayed several times, no? I'm just speculating here.

I'm sorry, 2004 was a long time ago. It was on one of the PC gaming sites from back then, and the interview was post-launch on the PC. Google as of today only gives me pre-launch marketing hype.