Here is the deal. It doesn't matter if its UE3 or not. Its all about the developer and the artists. Are you telling me you can't see the difference between Gears of War and Homefront? Because I sure as hell can . Its all about how well the engine is used and how talented they are at maximizing the engine. If you saw the new realtime demo of the Unreal Engine 3 and what Epic thinks next gen will look like then you will realize Unreal Engine 3 is capable of producing graphics that make the Killzone engine look like Doom.
The reason that demo looks so much better is because the hardware pushing that new UE3 demo can pump out multiple times more polygons than the PS3 and 360 could even dream about. I don't know the exact numbers obviously but I'm pretty sure the 360 and PS3 are able to produce around the same amount of polys while running a smooth framerate. When that is the case it becomes time for the artists to use textures and talent in creating great looking characters while still keeping the poly count low. Lighting also makes a huge difference and Gears 3 has obviously made a giant leap in that department over Gears 2 and 1. Any studio could make the best looking game ever if they had the hardware to let them use any amount of polys and any resolution.
Just because its UE3 doesn't mean it can't look as good as the best on the market right now. Just because its not on your system of choice doesn't mean it can't look as good as the best on the market right now. I'm giving the PS3 props if you saw my list of what games I think have the best graphics but next time you pop in Killzone 3 do yourself a favor and go up to what you percieve as amazing looking and look a little closer. Those steel beams you see in the distance on buildings which look like they have substance are flat. Go walk down to the end of a corridor and look at a wall that most people wouldn't look at. There are low res textures everywhere on that game. Its overrated.
