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Fumanchu said:
I would say it's a fallacy to equate extra grunt with more work. A lot of the enhancements are dynamic/procedural that the game engine handles;- lighting and tessellation probably being the two key areas that will separate the new generation.

It's not the grunt itself that causes a need for more work.

It's competition. With a system that has more grunt, developers are capable of making games with more detail and more complex visuals, which means more time required to develop code and to develop models, etc. It costs more do to these things, but some developers will be quite happy to spend the sort of money necessary (for instance, Call of Duty developers). And as a result, other developers will effectively be forced to also spend more, in order to avoid significantly losing out on comparisons.

Development of new tools to reduce the difficulty of developing code and models will happen, of course, and these will put some downward pressure on costs... but such development is slower than the increase in power, and thus net cost still increases.

Anyway, enhancements in lighting and tessellation don't require massive boosts of power. The next generation of game engines, you're right about... but the next generation of hardware is the problem, not the engines.