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Now that you are all done remembering, let's look at what we have today. Best example is Modern Warfare 2. Same engine, same gameplay, a handful of additions and tweaks, $60. Look at Uncharted 2 (yes, I went there), same engine, same gameplay, a handful of additions and tweaks, $60. Left 4 Dead 2, same engine, same gameplay, FEW MINOR additions and tweaks, $60 (or $50). It seems only Metal Gear Solid 4, Final Fantasy 13, and Gran Turismo 5 are a few of the handful of true sequels this generation. Everything else would have fit right under Expansion Pack, and cost accordingly, 10 years ago.

Excuse me a moment here.  Uncharted 2 is an entirely new story, with a bunch of new dialog, and they also threw in a multiplayer mode.  Left 4 Dead 2 is in the same boat, and also upgraded, and has new weapons and added a melee attack.  I won't comment on MW2, but it is similar.  Hiring voice actors and doing a new storyline isn't free.

The issue now is that the costs aren't in the engine, and the hardware, but in the paying the talent to utilize the engine, and craft a new storyline.