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Firstly, console success doesn't depend on any advances in technology.It's all about the games and how fun they are.

Ignoring that, I don't believe we will hit a limit in computer technology scaling - Moore's Law will hold for the forseeable future, and beyond that new forms of processing like spintronics, quantum computing, photon-based chips and so forth will allow features on subatomic scale.

I think a more pressing limit is how well programs and games in particular can scale to take advantage of these extra transistors - multicore isn't going too well even on 4 cores at present. What will it be like at 100+ like Intel, AMD and Nvidia seem to be aiming for with Larrabee and GPGPU?