First I'd like to point out that we are very, very far from photorealism in games, and further yet from what I can only describe as videorealism. We cannot yet make animated movies that can fool the human eye (but we're getting really close) so the day a true videorealistic game comes out is far away indeed.
That being said, I do believe that some types of games might benefit from such graphics. But the benefit gained from it are much less than most would probably think. We are now at a point in time where 3D graphics have gone from ugly to acceptable, possibly even bordering to good. Further advancements will not increase the experience in the same way at all.
Right now the best way to bring out the best of the graphics capabilities is to avoid the real world. Just look at Loco Roco. Noone can say the Loco Roco graphics are not complete, but anyone can spot mistakes and flaws in games like Metal Gear Solid. With realistic graphics, stuff we're used to and see every day, it's much more easy to spot the mistakes. Basically it's the same principle as the uncanny valley. The closer we get, the more artificial it will look. Until it looks perfect.
I do not doubt that developers will continue to pursue the realistic look, but I think it will be many years before we start to make some real headway in that direction. Current generation consoles and computers of today are simply not powerful enough, or it might be that we are attacking the problem the wrong way.
So what should you take away from my semi-rant? Two things really. Uncanny valley exists for graphics in general and it will take very, very long to get over it.