Photo versus illustrated characters

Jessica, 

This is a tricky one. Your boss and you both have valid points supporting your unique preferences. If I was at a similar impasse, I think I would turn to the target audience for guidance. I'd go hunting for data on their preferences—or, better yet, solicit their feedback via poll, survey, etc.—then use that data to guide the ultimate decision. This method is supported by adult learning (andragogy) principles which hold that learners engage better when they are given a chance to participate in decision making processes. 

My two cents on the matter - I'm not wild about using characters (of any style) in my own e-learning creations, but sometimes they are a useful tool. During those "sometimes" and all else being equal, I'd probably pick modern illustrated over photographic... for similar reasons to what you explained above. 

Also, I've been in a not-too-dissimilar situation with my own boss. I let her "win" and still made a great presentation that was effective for the audience and I was proud of. 

Good luck!!