One more thing. If the difference is big enough, every improvement over what is at the moment being considered standart will take more manhours to develop. Games pushing the limits of consoles this gen have all been in developement for a fwe years and involved dozens of people (coders, artists etc.). This is the best Konami could do with PS2, the staff and the budget - MGS3. An amazing game. To make better AI, better animations, better graphics, physics and better everything, it would take more manhours than it did to make MGS3 (i suppose).
That translates into more people involved or longer developing time plus more money in both cases. The games themselves are not gonna get 10 times more expensive in retail. So the developer will have to draw a line, how much innovation and improvement does he want to leave out (even if the hardware permits those improvements) to keep the project within a reasonable budget.
So far, games ar not yet movies and game industry is nowhere near that of filmmaking. 100mil budgets are not around yet for games. That means that soon enough, the hardware itself will not be the limiting factor. This happens each gen. Only the third wave of blokcbuster titles on each new console starts to scratch it's full potential (not the case with 1st and 2nd party developers, as they have more time with kits than anyone).
I'm not involved in game development in any way, but this seems logical. In the SNES or even PS1 dayds a team of less than 10 people could make a game that pushes the hardware and raises the graphics bar. Now I think that's impossible and on PS3, X360, Revolution it will be even more so.
The power difference between PS2 and XBOX is not that significant to me. Most of the cases, better art and gameplay are a lot more important to me than more polygons or better lighting. I suppose it's not gonna be that different with PS3 vs. X360. Only this time arround, Microsoft might not have it's only advantage, so they will have to try that little more and come up with something original to keep people careing.