The best technical piece i've seen on consoles this year is Call of Duty 4, and it's third party. I think the third party developers have the resources to create graphics on par or better than first party offerings. Just remember that Mass Effect is made by Bioware and they've now become a third party.
Most games will in the future use tools like Unreal Engine 3 to create their games. This is how they can cut down on development time. The engine can create some brilliant games, and pushed in different directions can result in games that look and play nothing like each other.
Also look for the smaller third parties to keep getting swallowed up by the big boys, or expect more mergers. Activision Blizzard and EA are only the beginning. Just know that EA has a minority stake in Ubisoft, and after Assassin's Creed, is thinking of buying them outright.
As far as which console makes prettier games, i'd say they are neck and neck right now. PS3 is "supposedly" superior, but the proof is in the pudding, and they haven't proven a damn thing yet.
Tag: Became a freaking mod and a complete douche, coincidentally, at the same time.
