Of course Blu-Ray can mean higher texture detail.
Whether the game is streaming off the blu-ray or hard-drive is not the point (and seeing as though a hard drive on every XBox isn't a guarentee, it becomes even less relevant).
If I have 1000 textures for my game that just fit on a blu-ray, and the game could run performantly on the blu ray system and the non blu-ray system with textures at that res, then blu-ray is clearly a score. If you need to reduce the textures resolution/detail just for the sake of fitting them on a DVD or 2, then DVDs are hurting you.
A very recent example along these lines is Rage. He has to compress on the Xbox 360 cos of lack of space. Hell, the game apparently would run even better on the XBox 360 according to Carmack, it is just space that's the issue.
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