I agree with Happy here, and I think his point wasn't that if you can't do it, you shouldn't try, but that if there's no reason to spend the extra 10 million on graphical upgrades, you shouldn't.
Here's my reasoning. The PS3 and 360 are both fighting the graphics war. The big studio's seem hell bent on proving which console can produce the prettier graphics. As someone pointed out earlier, they are attempting to ride the cutting edge. But just like anything else in technology, the cutting edge is MUCH more expensive.
Who here actually buys the newest and greatest tech tidbit to come to market? I certainly don't, because I can get the second best for half the cost. Why spend rediculous amounts of money gaining marginal returns on that investment, when they could make games at that "second best" level for much cheaper and they'd STILL look amazing?
The problem with companies riding the cutting edge is that it promotes an environment where people start comparing games more on graphics than on content as a whole. In that environment, studio's need to continue riding the cutting edge to compete which drives up development costs for everyone and turns it into a situation like we have now.
5-10 years ago, a small percentage of games had huge budgets, which is perfectly fine. Now, most games have huge budgets and everyone suffers. Games are more expensive to buy, take longer to make and if they bomb (aka Lair), the studio and publishers lose massive amounts of money.
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