Well, imo it IS a bad start. Everytime new technology arises they fall into the \'pitfall\' with the content being the cliche sci-fi metallic environment and characters.
Imo it would have been better if they had a game with a wide open environment with both complex architecture and trees, bushes and waving grass in it. I wanna see realtime radiosity FX and next gen particles. For example ; the part with the windmill at the water in Ico... if they could have that photo realistic in real time .... or that part in the garden with the wavy trees. My God... mental ray, HDRI lighting is very high on my wishlist for next gen graphics.
But imo the biggest challenge for next gen games will be better AI. Already in this generation of PS2, Xbox and NGC games, alot of the times AI comes off as unconvincing in relation to the \'realistic\' visuals. I think we\'ll all celebrate the day scripted events in games are no longer needed.