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Here's the way I see things. With a few exceptions, the better the graphics, the higher the focus on realism. The more you focus on realism, the less fun the game, in my oh-so humble opinion. I'll take a SNES game with tight, responsive controls and the ability to jump on my own over a semi on-rails "next gen" game with "realistic animations and physics" any day.

Oh, and once you get to the point where simulated car seat fibers are a big deal in a racing game, there's something seriously wrong.