I think this generation has demonstrated that just because processing power is available doesn't mean you have to take advantage of it, or that you will get any (financial) benefit from doing so ...
Realistically, how many people would be that upset if 75% of games in the next generation were (essentially) games built using the graphical technology of the best Wii games with higher resolution textures and (moderately) higher detailed models so that their output at 1080p@60fps looked really crisp and clean? If the other 25% was made up of games that were (essentially) upgraded XBox 360/PS3 games (say 15%) and games that pushed the systems to their limits (say 10%) you would end up with games produced at a budget the publisher/developer could afford, in an industry which would support the variety and creativity that users are looking for, with the impressive experiences everyone can enjoy.