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Soleron said:

The main issue is that to make the graphics for the game as good as current CGI the number of artists and designers you'd need to employ would be so large that the game would never make a profit. Many non-Halo, non-CoD HD games are on the edge of this right now.

Hardware is fast enough now or will be fast enough within a few years to do it (look at current high-end PC graphics cards). But you won't see it in the vast majority of actual games because of the development cost.

Shrek has far fewer art assets because of its length and views them from far fewer angles than a game does.

Procedurally generated content could help with this, I would hope.