I can't entirely agree since that's essentially saying there is no more headroom for consoles when it's a known fact that the most impressive games of any console platform invariably show up late in the life cycle.
The hardware doesn't change; developers simply become more familiar with the environment, coding and resource libraries are vastly improved, etc. Granted, there's no magical "unlock additional processing power" button in any console, but the best developers do tend to come up with the most ingenious solutions the longer they've been working within a closed platform.
It just means console developers can't take a PC hardware approach to development under the assumption that hardware improvements will eventually allow more people to run the software without scaling all the hardware intensive features back (Crysis being a prime example).
What will probably end up happening with the PS3 is that some (a minority) of its developers will be tier 1 developers that can actually utilize the platform to its fullest extent, while many will continue to make no special efforts to optimize and others will simply throw in the towel and abandon the PS3 as a platform (not as bad as it sounds, it just means less crapware from untalented developers).
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