Reading the source this sounds way out of context. Perhaps Reach will match Killzone 2, but his words are very PR spin. I see no reason 360 couldn't support KZ2 level graphics, but this is a very tenuous source.
When MS issue public statements to formal sites, etc. saying this is what Reach is going to deliver graphically, then I'll take this more seriously.
EDIT : BTW this is the least 'confirmed' bit of news I've seen for a while, pls let's watch thread titles, okay. This is speculation based on a single, non-specific quote.