Anybody down on pre-rendered cutscenes, go watch the Halo 2 Anniversary cutscenes.

Frankly it just depends on what studios are doing. Its not unusual for games to do a mix of in game and pre rendered.

I think is all a matter o file size.

I don't usually care, but I quite liked the hand drawn ones in Thief series.

Pre-rendered.
Cut-scenes should be a reward for finishing a section, not an interruption you want to click away.

Pre-rendered will keep the cut scenes shorter and without the constraints of the engine they can be a lot more engaging. Fast cuts, multiple angles, no limit to moving elements on screen, fast motion sequences.
Pre-rendered scenes can mask load screens and other work that needs to be done to prepare the next section.
Pre-rendered scenes can all be from games assets, yet can also give an exciting glimpse of what will be possible next gen. Either way, they can use the best possible version of all game assets, no close ups with flickering shadows and textures popping in.

The only downside is character customization. However the movie industry has worked for a century with blue screen, same as live action games. Rendering the correct characters in between pre-rendered backgrounds shouldn't be that hard.

Pre-renders can be made using largely similar engine/assets, but avoiding limitations of hardware...
If in-game play doesn't really zoom into faces ever, then if the cut-scene uses higher detail facial assets,
and possibly higher quality surface material / reflections for that, then there isn't a jarring contrast per se,
simply because there is no 1:1 comparison to highlight a difference vs. in-game engine/ game-play.
Similarly, pre-render can avoid pitfalls like FPS drops, or full resolution for complex scenes with transparency etc
(even when during normal "action", there would be FPS drops or dynamic resolution scaling to compensate)
So I guess I would say I appreciate "subtle pre-render videos" which improve graphics but not so much it forces you to notice.

Cutscenes shouldn't even exist in the first place! Damnit, games are an interactive medium, I play them because I want to do something. If I want to watch a movie completely passive, I would watch a friggin' movie for crying out loud! In a game, I expect to always be free to do whatever the hell I want. Some Dialogue can just happen in game and if I'm bored, I just walk away. Like in Skyrim. I love that. Half-Life also did this and that was nearly 20 years ago! It's really not that hard. Just don't rip me out of the game and let me play the way I want to play.

Fuck Cut-Scenes! Who's with me? =P