Maybe I need to see it in action, with a character walking through it, but I'm not seeing anything spectacular about the 2nd image to say that without a doubt the PS5 couldn't handle it.

Man that looks amazing. Can't wait till we get there

BoTW has a HUGE amount of unique art style. The above images are purely realisitic. I have no problem with games taking advantage of modern technology to make their art styles look even better, but I do have a problem with the vast majority of "Major" games all looking the same (realism).

Wow! This is certainly an improvement over 8th gen. Probably some of the best CGI I've seen. I'm not fond of realism but I can't help but to appreciate what artists are doing with 3D. Imagine if Square Enix used Pre-rendered graphics like the second image for a classic FFVII remake, lol.

I don't quite understand what is meant by Instance Optimization as a procedure. Does it make those elements fit better with one another? Look more natural?

Ray traced lighting strikes me as the most noticeable improvement we'll see next gen (not that there aren't already a couple examples now). Also looking forward to more physics, more dynamic (less prebaked) rendering, and hopefully more innovations in animation like what Ubisoft is experimenting with.

That's pretty awesome. Falls a bit in the uncanny valley though, and I think that's mainly because of the relatively low-resolution textures and possibly lighting. I'm not a graphics expert though so I'm not 100 % sure those are the reasons. But still, very impressive!

So what type of specs on consoles to run that?

You mean sort of like geometry instancing ? 

Development time and costs would sky rocket even more to achieve this kind of graphics...