I think that Crysis is gonna be one of the best looking games in the next 3-5 years. Games like Unreal will surpass it in level of detail on the models, and what little textures you would see, but it's not gonna pass Crysis, and it's massive enviroments. I think that the PS3/360 are gonna be limited 75% of the time by the deveopers investment. I think that, likely next generation, games could cost well into the 100+ million price range. (for the graphics your talking about HappySquirrel)
I think that UE3, and Crysis are the best their gonna look except for the freak, 100+ million price range game.
Why do I say that? Because the PS3 could in theory render 'Final Fantasy The Spirits Within' at about 5-20 FPS. Now that is really low, But the model 'Aki' Took one full time artist, over a year to model. So if you had say 100 baddies in the game total, that is around 20million in character art, consider that the terrain would need an equal ammount of love, add another 10-20million. Sound, give that side a fair 5million, Add in all the programmers, mappers, and stuff. Your looking at a 50+million dollar game, that isnt even that epic. That is more like a FPS ammount of baddies. So like I say, I can see the games your talking about happysquirrel costing over 100million. I dont think games will ever sell well enough to turn a profit on that, so they will just continue to make games with Crysis style graphics.
I think the next step up from the PS3/360, will be very close to realism. The PS5 will be look real. (EG: the games would look quite a bit better than FF: Spirits Within)