State of procedural enviroment creation

Im not sure, but the tessellator on the Xbox 360 sounds like it could be right up this alley. Am I right?
 
The problem with procedural content is that it doesn't always match the game play needs. You can't easily build traditional gameplay structures which often involve confining the player in one area without control over the overall structure.

I suspect we're heading towards something more of a hybrid where levels and gameplay are authored in broad strokes and the details are generated.
 
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