The next gen systems may be less about increasing development costs, and more about reducing hardware constraints for developers.
It's universally agreed upon that the key constraint of current consoles is in the limited RAM/VRAM.
Updated CPUs and GPUs are simply a given in keeping with current processor technology. I'd be surprised if SCE continued marketing its latest console through its "magical" generations ahead CPU (Emotion Engine, Cell Broadband Engine) developed from the ground up. It seems more likely that if they don't use an updated version of the existing CBE with additional SPUs or cores, or both, it will probably end up using a PPC CPU that has more in common with the one in the next Xbox than not.
If anything, advancements in these areas (as well as current unprecedented low prices on RAM) should all lead to hardware that is simultaneously cheaper to produce while being multiple degrees more capable. That means fewer constraints for programmers, more efficient allocation of programmer hours (assuming the SDKs/library/hardware are developer friendly) and cheaper development. If more man hours are diverted into art resources (higher res textures, additional texture maps, higher poly count models) it would hardly balloon development costs the way some assume it would.
As for the expectation that games would automatically become even larger, I'm not even sure where this assumption comes from. That was something more tied to the media on which a game was published rather than the hardware/memory capacity. As it turns out, BD format games simply gave developers more space on which to publish their software (fewer constraints, no multiple discs).
It's well known that game development on both SCE and MS next gen platforms is already in progress so it's more a matter of when those next gen titles will be ready than anything else.
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