I think far too many people overestimate the "value" of graphics when it comes to videogames ...
Suppose for a minute that Nintendo decided to produce a system in the next generation that matched the per-pixel texturing/lighting/effects of the Wii but output at 1080p how upset would you really be? I know it is an unusual question buy why do people insist upon graphics heading towards photorealism when videogames are unrealistic anyways?
With that said ...
Nintendo has a massive advantage heading into the next generation. The unexpected success of the Nintendo DS and Wii will lead (pretty much) every third party publisher to trust Nintendo's direction regardless of what they choose to do, and if Nintendo produces an affordable system which has the features that the majority of gamers want people will buy it.
