The counter argument is that at 480p game assets in previous generations were unable to properly display their fidelity/detail. I'd argue that we aren't there yet for 720p. A 720p BR movie has more than enough detail in its pixels to show off high end CG details not yet doable in games.
The most pressing area of diminishing returns is in HD+ resolution imho. The higher you get, the less noticeable it becomes. We already see this with the countless DF comparisons. SenjutsuSage is spot on. Ppl will see gameplay demos of various games that look great asset-wise and talk as if these new games are the best looking things on the planet. Then when DF analyzes them and we find out they are a few pixels short of 720p all the sudden the games are viewed as fugly. Without a side by side comparison to pour over, pretty much nobody would even notice in most cases.
Add into the mix Durango's display planes giving devs one more way to manage where pixels are placed in relation to certain assets and things are gonna get a whole lot murkier next gen I think.
