But my entire point is that pre-rendered cutscenes are a waste of not just data capacity, but also developer effort that could be better put toward adding more content. As I said, I buy games to play them, not watch them. There's nothing wrong with cutscenes, but if you've already got a graphics engine that plays the game, use it -- it's much better for continuity. Gamers feel much more connected to the characters when they're in control of them, and when the characters' representations don't constantly switch between two differently-rendered versions. I think the PSX Final Fantasy games support this argument.

Too true, the days are now here where we can have cutscenes that look brilliant, but use the GFX engine rather than prerendered stuff.

The OP's copypaste is assuming that the PS3 comes out on top this generation.