Look at Lost Odyssey. Doesn't most of the games storage go to fmv's, thus the reason for multi-disc? Heavenly Sword might be short, but it has alot of background going on. I ran for miles in the battle with a thousand or more npc's and each were doing there own thing. I literally mean... you see then from afar and then run up to them and they are coming for you.
If HS, needs so much storage and yet is a short game... obviously more space is truly needed for this 'Gen' and 'Next Gen' to have similar uncompressed data as well as long game play. I don't think GOW3 will be a short game and I don't think it will be crap in the gfx department... if you get my drift.