A couple folk have been curious as to whether or not the use of only one core really effects graphics, or if it's more an interesting fact due to the possibilities it presents with physics and AI usage.
The short answer is, MS was right - general purpose processing is the way to go, because no one has a strong idea of how best to utilize the multi-threading.
The longer answer has to do with what Cliffy doesn't mention. UE3 code isn't only using one core, it's only using one thread of one core. It's still single threaded code. There's SOOOOooo much more they can do with this CPU.
Currently, none of the X360 games I've investigated are doing any real multi-threading... and what happens is the one thread on the one core being used gets maxed out, and then the GPU has to wait on the CPU... so when games start really using the CPU, the GPU will have less idle cycles, and games can start looking much, much better.
Point is - graphics will indeed go up, potentially very significantly, once the CPU is better utilized.
Additionally, the GPU works so closely with the CPU in X360, that it is very possible some of the graphics work could be unloaded on the CPU, but honestly - I don't know exactly how that could be done, and won't pretend to know how... but there are people smarter than me working on it all the time, and I wouldn't doubt that it will happen.
What interests me most in all of this, is the concept of multithreaded code. I can't wait to use some of the diagnostic tools we've got, and see a developers milking all 6 threads, and seeing the GPU idle cycles diminish to 0-5% average... it's just ridiculous to think about what this machine can do.
...but again, multithreaded code is much more difficult than it sounds. "Doing physics on one core" seems like such a relatively easy thing to impliment to many, but in practice - it's really, really challenging. Far more so on something like the PS3, but still - it's really challenging to have different code running on different processessors simultaneously, keeping it all in sync, and then debugging/optimizing on top of it all... looking at a 6-part call stack (one per thread) is NOT a trivial, non-intimidating reality to debugging for any developer that's going to actively use all 6 threads.
Anyway, I'll stop my ramblings now, but suffice to say, yeah - when all 6 threads get used effeciently, we'll see some phenomenally amazing titles.