Gameplay is more important than graphics, I think most people agree with that. Graphics are still important.
But I don't think either sell systems as much as the number of games available.
Probably like 99% of people that buy games do not research anything about them or read reviews. They see a game in the store and buy it. Maybe you see a game with a license you like and buy it, or maybe you see a lot of games for the genra you like.
Graphics are always improving, but this gen Sony and MS took a huge jump that was not really necessary. It adds a lot to the cost and in the end won't matter that much.
Now if I had a choice for TP to be 1080p or 420p, of course I would want the best graphical version (assuming everything else was the same). But I, and many others still bought TP to play in 420i or 420p anyway. So from a business stand point, there isnt much need for the really high graphics...
Now, Nintendo had a strangle hold on the hand held market so more powerful systems failed. But Sony had a strangle hold on the console market and launched with the most powerful (or at least equal with 360) system and they are now in 3rd place, and may stay there forever.
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