I think the real economic concern for cutting edge tech in gaming isn't actually the hardware prices -- hardware always comes down in price. The PS3 will be 200 dollars within 5 years. The supercomputers of today are half their price tomorrow.
The real long term concern, I believe, is actually the cost of software development, as software development costs really do not come down, or come down so slowly that any gains made by engine development are more than superseded by the ever increasing complexity of games. Despite the fact that engines were developed heavily for the PS2/Xbox/GC, game development costs went up and up then, too, then they seemingly doubled overnight with the PS360, and then they'll increase again when the PS4/720 are made.
Unless there is an equivalently large increase in sales to compensate for those increasing costs, then there is a problem. And while the industry as a whole is booming, I'm not sure "hardcore" games are growing all that fast. Fighters are selling less, but Shooters are selling more. Racers like GT seem to be saturated. The action game market is saturated and hasn't seen significant sales deviations for years.
I think there are a few comparable examples in other genres: Point and Click Adventures, and SRPGs. There are still games made in both genres, and there are still games in both genres that receive high praise. However, because the market for these types of games is known and it isn't growing very quickly anymore, the cost of development for these types of games requires limitation. You'll see most Point and Clicks looking like they're on 10 year old tech, because that's the budget that games of their popularity warrant. Most SRPGs look like late PS1/early PS2 games these days, and it will probably stay that way.
At some point in the near future, I think most of the other "hardcore" genres will begin to reach their limit, if they haven't already. I think JRPGs are probably already there, for example. Which again, isn't a bad thing at all -- as Point and Click Adventures and SRPGs are still awesome, with many great games still being produced. It's just important to recognize that economic restraints are coming.