Its hard to say at what point graphics can increase and at what point they plateau, the unique gap between the Wii and 360/PS3 is interesting in which standard is true next gen. My personal opinion: If Sony and MS want to create their own standard of graphics by building ridiculously expensive machines, that's fine, but don't hold Nintendo to that standard and call them backwards simply because they chose to stay the course. If the PS3 and 360 graphics were truely next gen they wouldn't have needed to inflate the economic standard of 200-300 dollars a unit to 400-600 dollars. Next gen is what's can be done within the limits of the current technological economy, not what can be done regardless of the cost. Sorry the Wii's graphics aren't that impressive, but technology has plateaud and the only way it can go any farther at this point is by doing what MS and Sony have done and make ridiculously expensive pseudo-computers.
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