I believe that last gen pretty much reached "good enough" graphics for the most part. Just from personal experience, I've found myself often recoiling in horror or sort of laughing at PS1/N64 graphics, while GC/PS2/XBX graphics still look just fine for me. Not that I don't enjoy a graphical treat like Killzone 2 or MGS4, but I don't find the graphics of a Gamecube game getting in my way of enjoying them, while I often do for PS1 games. MGS1 and MGS:TTS are the perfect example of this, at least, IMO.
Either way, graphical power has little to do with sales figures, no matter how you look at it. In almost every case, the weakest system wins. The WII and PS2 are the weakest technical systems in their generation, but ended up winning big. After the Saturn dropped out, the PS1 was the weakest, but beat the pants off the N64. Handheld wise, the Gamegear, Lynx, NeoGeo Pocket Color, Wonderswan, N-Gage and finally PSP probably all have a support group for losing out to Nintendo's (comparatively) underpowered handhelds. Only the GameGear and the PSP even proved a real competitor.
I'm not sure I can think of a single example of graphics and technical abilities translating into sales figures. There probably are a few, but they are the exception, not the rule. If anything, it seems that technical ability is almost a hindrance to (sales) success.
