To be fair, there's going to be a GTA4 controversy no matter what. Even Rockstar knows about it (I'll send a link if you need me to.) If anything, those have HELPED sales.
The difference between cartoon violence and real world violence is pretty big. There's all sorts of violent stuff you can do in cartoons because it's easier to say "this isn't real." I mean, getting hit with a falling anvil will kill you IRL.
I think people can still tell the difference between a videogame and the real world. For those who like GTA's dark humor the realistic violence won't matter.
For those who like sandboxes and don't care about killing, this might be a big shock. Assuming they buy this at launch, which I don't think will happen. A price drop on consoles will happen before GTA4 sells in mass quantities.
So no, improved graphics won't hurt sales. At least not as much as the "price to buy a new console" will.
There is no such thing as a console war. This is the first step to game design.
