well, THEY are wrong, its the unreal 3 engine, which didnt exist back when fable 1 was released. And for the the record Fable 1 didnt use unreal engine at all.
[Edited by Ashar, 9/13/2014 8:53:21 PM]
It's some strange mix of both.
C:\Program Files (x86)\Steam\SteamApps\Common\Fable Anniversary\WellingtonGame\FableData
That's where most of the original FableTLC data is, then it's wrapped in UE3 for improved graphical effects.
You can even mod the Fable data with a little bit of work.
Link
That is the same site/post I found. These tools just need to be reworked for the new game and then I will be VERY happy.