This game is notoriously poorly balanced and has myriad bugs. The graphical palettes seem to match what would have been possible on the master system moreso than those that would be the norm for the GenMD for most of its library. (Flat grays do not frequently appear in GenMD games and most games on the system use a lot of gradients, while PSII mostly sticks to simple flat colors that would have likely been very similar on Master System. Compare to PSIII and PSIV then to PSI on Master System and note the trends.)

“1993 Phantasy Star II Developer Interview.” GSLA. (n.d.). Web. 1 Jan. 2018.
Hayashida: Phantasy Star II was originally planned for the Sega Master System, as a direct sequel to Phantasy Star. Later it was decided it would be released on the Megadrive, so we had to rework all our plans. Despite that huge change, we only had a half year to finish the game, a real oppressive schedule.

“Phantasy Star 1993 Developer’s Interview.” (n.d.). Web. 9 Aug. 2017. (Could not find a full transcript)
Naka: For Phantasy Star II, I wanted to do the 3D dungeon as well; however, no matter how hard I tried, the capacity for the Genesis cartridge was limited, and there were only two and a half months for the development period.

I'm willing to bet Hayashida was being slightly general about having half a year rather than 2.5 months, and its likely that he was including some of the dev time from before the switch as well. Other comments mention that they had 3 different people working on art assets at the time, which also explains why some of the art looks different in style and quality, though not drastically.

The extremely clipped development time is the reason for the game's dungeons all being a chaotic mess. There wasn't enough time to think about how best to lead players through a successive difficulty curve so they just made them all final dungeons with different level enemies in them. Also a comment from Naka that I could not source.

EDIT: I meant to mention that I doubt there was any "porting" done. Rather its very likely they were just forced to start over and salvage anything they could. This is not the only time this happened at Sega, and it would later happen with the NES-SNES and SNES-N64, N64-GCN over at nintendo.
Also true of quite a few playstation games completely starting over without any release date extensions across multiple generations.
This just seems to be how the game industry works.

I'm not very good at this topic so I can easily be wrong, but apparently the CPUs of the Mega Drive and and the Master System seem to be vastly different. And since games were programmed in assembly at that time, I don't think they could easily port a Master System game into a Mega Drive one and vice-versa. So development must have started for the Mega Drive already, afaik. The graphics could still be partly made while planning to release the game on the Master System tho.

@Viscera Japanese Wikipedia says the same but again unsourced. Do have a source that claims that it was going to be released in December 1988 (both Sega Magazine and Beep magazine have it listed for Master System) https://www.smspower.org/forums/11428-Sega87SummerCatalogJapan

This is my hunch, it probably started planning on the Master System as Sega had more games in development but moved to the Mega Drive due to the small library that the console had (think that there were only 4 games! for 1988 compared to the Master System having 21 games published & developed in house, 5 they published but developed by Compile/Arc System Works/Aicom/Westone and 1 that got cancelled but was released in 1991 in Europe [Summer Games] again outsourced, Bomber Raid aka the final JP Master System game was also in development too). Most of the graphics do look early Mega Drive like Space Harrier II but some such as the tiles look like reshaded ones from the Master System, the Dezo Owl and Leecher also look reshaded due to the black outline that the first game enemies had.

@shadowman44: How? Nothing about the graphics particularly suggests that it was originally intended for Master System. It just looks like an early Mega Drive game (which it is). And the only reference to that is HG101 (which naturally doesn't back up the claim).

Heard this was originally a Master System game that they ported over to the Genesis within a few months, looking at the character graphics I can tell this was the case.

Hm, no dungeon tiles. Maybe I should look into Megadrive decompilation...
EDIT:GEH! Getting anything out of this game is hell.