I remember seeing pictures around 2004/2005 of what new games would supposedly look like on the old 'next gen' (read current gen) consoles. The actual games were nowhere near the hype (games like Madden and FIFA). I seriously doubt that the next 'next gen' consoles will have graphics like this for the reasons you outline. I'd love to be wrong though. You could easily imagine this technology be used in movies - I thought Jeff Bridges' digitally altered younger version in Tron Legacy had such a case of the "uncanny valley" going on that it detracted from every scene he was in.