The fact that studios with infinite budgets, unlimited time and/or preferential support are able to eek performance out of rsx+cell equivalent to what can be achieved by more typical studios with far less time and far less money on xenos alone hardly indicates that Sony devs are aiming higher.
Heck, if you think there are a lot of rsx sucks posts here, you should check the official Sony dev PS3 support forums. You'll be overwhelmed by the myriad of posts of "...why is this slower than the other console..." or "...but the other console can...", etc, etc, etc. Of course, I'm sure all those developers must be totally wrong, and rsx clearly represents The Pinnacle Of Rendering Performance (tm).
Hey, I don't believe that Insomniac has had unlimited bugets or time and by November of this year, they will have produced 3 of the best looking titles available this gen (after only 2 years of the PS3 being out). I think Insomniac did the right R&D up front and did not fight the changes required to maximizing whats available in the PS3. Also, I never claimed that RSX was the pinnacle of anything and am very well aware of how ordinary it is... but how can a dev as smart as yourself not agree that Sony was much wiser not to blow their R&D + production costs on a GPU when the solution they have is giving them equal and in many cases better results (1st party games) then Microsofts most likely UBER EXPENSIVE investment in Xenos (that ended up causing ROD problems). Cell as compared to Xenos was a good investment that will bring many future returns and don't get me started on Blu-Ray as it is bound to bring some money to Sony's pocket.
Sony, is also improving many of its libraries and tools which I think will greatly help with multi-platform titles being at par with the 360.
Also, if history serves me right the Playstation 1 and 2 were always behind their competition big-time in terms of their GPU. If anything, the PS3 seems to put them on the best position they have ever been (in terms of graphics).