I sure hope it has to do with creativity, productivity, and edutainment as far as software is concerned. I think those 3 themes might help them gains some new fans in the Playstation fold(and be interesting to the females the wii has courted). Heavily leveraged with a growing community, content and community crafted content called PSN that people can access anywhere.

You make a good point. Its a pretty stupid move by SE not to do it. People obviously want the game so why not do it? It's guaranteed money. They could probably overcharge and make it expensive too and people will still buy it.

I think the next round of changes will be evolutionary than revolutionary. Sony will probably focus on just standard 1080P resolution games better for now and making the hardware cheaper to build. Better GPU and more memory seems to be in order as well as faster bluray drive and enhanced CPU.

Good guess! Anyway you would need a 60 inches + TV to see a big diffence between 1080 P and ultra HD. Doesnt makes sense to allocate powers there. So I think your right.

They already said that it would take 10 years to do a remake of FF7, so why would it be at the launch of the next console that won't be out for another 3 years.

I don’t think there will be a major perceived jump in graphics in the next generation for the following reasons:

1. Console manufacturers will (probably) be releasing smaller systems that use less energy than either HD consoles; and are more reliable
2. Console manufacturers will be selling their hardware at more affordable prices ($400 maximum) while taking a more reasonable loss on them ($50 to $100)
3. The systems will be rendering at 1080p rather than 720p which will eat up additional resources
4. Diminishing returns on graphical investment ... Basically, if you quadruple the number of polygons per frame while quadrupling the texture data and quadrupling the complexity of the shader effects you will see a noticeable improvement in graphics; but the game will still have the same basic ascetic of a current HD console game.

well I agree with most of what you say I would like to add a few thoughts, first GPU processing power is roughly 10X what it was when the Xbox 360 came out so in two years a $400 console would be at least 12X more powerful thanks to the massive improvements in memory bandwidth between GDDR3 and GDDR5 great improvements COULD be made to graphics (and if console makers follow the current trend of using the GPU for more of the processing load with physics etc). But I think that the cost of creating the content will mean that there will be a smaller perceived jump in graphics but games will still look much better thanks to using methods that require less development time like anti-aliasing, draw distance and frame rate. So hopefully next gen we will see more games running in 1080p with 4-8X AA (or even 32X SSAA like Nvidia's high end DX11 Cards will be able to do) and 60 FPS. 

Sorry, but the market decides when this generation will end, not technology. The market is swaying towards a fast generation as the only thing keeping the systems afloat is price cuts. The PS3 is only $100 more expensive then the Wii and had to cut it's price 50% since Dec. 2006. This shows the PS3 is definatly not in high demand and not healthy. They are also out of Software aces.

Sony had two major peaks outside of the holiday season. The recent one was due to the slim, and I'm guessing the other was the first price cut (it was on Sept 5th). Contrast this with the Wii, which has many jumps all coming from software, and you'll see the HD Twins are not hot items. The longevity of the systems will depend on how successful Move and Natal will be. If they are a success, then this generation will play out longer and will probably last from anywhere between 2012 to 2014 for all three. If not, Sony and Microsoft will have new systems out before the end of 2012 and Nintendo could go as long as 2016, with a system out no sooner then 2014.

they do have one ace left as far as I can see Gran Turismo 5, I think people underestimate how big this franchise is but it's impact has been lessened by GT5 prologue but with heavy advertising and bundling I see it doing much better than any of sony's "aces" so far. GT is probably sony's only 10 million+ capable franchise thanks to it's casual pull, I know someone that only bought a PS2 for GT3. But I do agree that sony may have trouble keeping momentum after this year.

How is that quick? The only console to come out in the last 20 years to be around longer and still be selling is the PS2. Do you even know what you are talking about? The PS1 was about 5 years before the PS2 and the PS2 was about 6 before the PS3. If the PS3 came out in 2011 it would be 5 and 2012 would be 6. And again the 360 has already been out for a longer period than the original xbox and 2011 or 2012 would put it on the market significantly longer than it's predecessor.