A lot of people will expect huge leaps in every department of a game's graphics. While this is true for certain departments, others can just be improved on while keepign the same basic fundamentals. Today's sprites look a hell of a lot better than yesteryears'.
Some nextgen games will start to use more and more real 3d models for spectators, others less so. It will all depend on how comfortable the team is with throwing away resources on something that is rarely looked at with much detail. Some things come in small steps, others in leaps and bounds. We're seeing leaps and bounds in physics and shader power, but other things are slower to evolve with every gen. We might
expect too much out of nextgen at first, but in the end it's still a video game, and devs still work very hard to cut corners and "fake" certain elements when they can so that they can concentrate the detail up front.
So yes, we are seeing things progress very rapidly, but it doesn't always make sense to just throw away resources when you can have an alternative that looks almost as good to 80% of players.
just my two cents