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The reason Nintendo went with weaker graphics on the Wii (though I don't think they expected it to be as weak as it was) was that they said we had reached a point of "diminishing returns" as far as graphics were concerned and that we had reached a point where games looked so good that it didn't make sense to focus on power. Fast forward to today and we can see that it was a load of poppycock. The graphics jump was greater than we ever expected.

Now I'm not saying that the average looking games are going to blow what we have today away. Like the OP said, they may actually be comparable. The upper echelon of games, I suspect, will be a VAST improvement, though.