Point taken.  But I think Tomb Raider, Beyond Two Souls, and the upcoming Metal Gear looked fantastic.  I really think The Last of Us looks worse than God of War 3 and Uncharted 3.  Not a bad game but not a graphical powerhouse. Animation was great, though.

Nah. You can improve the compression if you're willing to spend compute cycles, 8:1 and 16:1 can be achieved, not only that but more data could be compressed too.
AFAIK only Textures are compressed on the PS3, you could also compress things like Normal Maps, light maps, shadow maps, HDR Textures etc'.
That would conserve allot of memory, then you can drive up the quality of each.

Plus, they could "bake" more things into a scene, that don't require extra passes.

Also, there is more to rendering than Rasterization, Ray Tracing and other methods are pretty demanding with the pinicle probably being Photon Mapping.
nVidia however did attempt to not "follow the crowd" during the "3D Revolution" where they attempted to use Quadratic texture mapping rather than the standard Polygon with the NV1 core.

As for culling... It can always be improved.
The Z-buffer isn't very smart and there is always at-least a little bit of overdraw, sometimes by a fairly large amount as the engine attempts to predict where the user is going to be looking next.

Besides, developers have for a long time now been playing a game of "Sacrifices" for example Bungie removed the Tessellated Water and Triple Buffering from Halo 3 to free up resources, throw in improved compression and impostering and that allows Reach to offer better lighting, textures and polygon counts and a much much much longer draw distance. (Mostly thanks to impostering where it replaces a 3D model with a 2D sprite.)
Halo 4 took it a step farther and went with simple geometry for the games architecture and baked shadows in the game world to bolster character models and lighting substantually.

Essentially, each iteration looks much better than the prior, of course you would get some low level optimisations thrown in too.

There is still more to be squeezed out of the hardware though, well. In my opinion anyway, but I wouldn't expect anything massively dramatic.

You only have to optimise the game engine to do "more" only once, then you can use it for all your future games, depending on the game engine, that could be dozens of titles.

These consoles don't exactly have alot of theoretical power to be spending the cycles to compress/decompress the texture when they can spend it more on things such as lighting and dynamic environments. 

The xbox 360 likely also supports texture compression too see as how the radeon X800 series (which is the derivative of the ati xenos) supports the 3Dc extension.

I thought the pinicle of rendering was path tracing. (Even though it doesn't account for subsurface scattering but atleast it will converge to the correct solution of the rendering equation.)

LOL it definitely does help to replace the 3D models with sprites. Just cause 2 anyone ? 

I agree on the cycles to compress/decompress, however if you design a game that is light on the CPU cycles, then you might as well use those cycles for compression.
Megatexturing in Id softwares Rage did that.

Also, 3Dc isn't the same as the much superior 3Dc+ :P
It doesn't compress all-the-things.

This industry has an insane push for ever-increasing-image quality.
It's a shame the unlimited detail never panned out as that could potentially even make the PC redundant. (For the love of god, I can't beleive I just said that!)
http://www.youtube.com/watch?v=00gAbgBu8R4

He is what? Please go and get to know about what he is currently working on before you post crap like this.