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The Witcher 2 cost $8,000,000 to make, so yes games can quite easily cost less whilst looking, playing and being shitting good :|

Onto the topic at hand, next gen console power.
The biggest bottleneck this gen has been RAM, if you gave a 360 or PS3 4GB of RAM it would make them 2 - 3 times more capable than they currently are. As it is though the next gen should have ATLEAST 4GB of RAM and should push for 8GB, or 16 times the 360/PS3, to be safe. Not only will the raw amount be considerably higher but it will run at anywhere between 2/4 times the clockspeed of the 360's memory too.

Processors have become far more powerful and effecient so a CPU several times that of the 360/PS3 CPU wouldn't be unthinkable either.

The biggest advancements over the last 5/6 years, 7/9 by the time the next Xbox/PS is released, have been seen with GPUs... GPUS have already exceeded the Xenos by a factor of more than 10 and will double or triple in power over the next 2 years. Ofcourse next gen consoles wont have the most bleeding edge GPU available at the time and nor will they need them but a GPU in the range of 8 - 12 times more powerful is not an unrealistic expectation.

In all the basic numbers should put it at atleast 800% that of the 360/PS3 but with a 'theoretical' top maybe in the reaches of 2000% that of them.