Development costs are not going down.
With good middleware you might ease the coding process, but the scope of many games is going to increase. People want to see huge, detailed GTA cities, huge Dynasty Warriors battles, The Sims in SimCity.
All that detail brings with it many design issues which need to be resolved, plus you're gonna need people modelling all those extra assets to dress up environments.
Gamers are not going to be satisfied with bare, empty rooms in a FPS anymore. If you're fighting in a library you want indivdual books to get knocked out from the shelves.
Sure there will be plenty of games which will just be slightly upgraded PS2/XBOX games, but then you'll get complaints - "XBOX 1.5 AMIRITE?"