No one can predict right now with any sort of accuracy whether or not the PS3 will be able to output better visuals than the 360, because it comes down to 2 seperate factors. One, what is the RSX? Is it simply a tweaked G70 (which would definitely keep the cost of the system down) or is it 1/2 G70, 1/2 G80? Or is it a G70 with console specific modifications?
Those answers remain unknown for now. The second point, is just how well the Xenos holds up. People forget that USA is a completely new architecture, and while ATI can spout a ton of theoreticals and possibilites, no one knows if the card can live up to it. Personally, I have a hard time believing ATI got it perfectly right on the first go, but still I wouldn't put it past them. The Xenos could possibly be a liability in the sense that it may not perform up to expectations. Or, it could be ahead of its time.
What isn't debatable IMO, is that the PS3 will easily trump the 360 in areas such as animation and physics, thanks to the Cell. These will go unnoticed by a ton of gamers, but IMO, is the true signal of the next gen. The cooperation between the RSX and the Cell will also be another factor that will allow the PS3 to do things the 360 simply can't match, though I don't think we'll see stuff like that for another 2-3 years.