Getting back to a previous issue, here's a very nice tech demo / benchmark that features DX11 tesselation and displacement mapping.
http://unigine.com/press-releases/091022-heaven_benchmark/
Couple of notes:
They should really dial the bloom and DOF back.
They should also note that tesselation alone is not enough for this detail, they're using displacement maps on top of it (extra memory cost! although only 16 bits per pixel is needed).
Very high quality artwork there, and the dragon was a good choice to showcase the tech. I'm not that much of an expert but shadows look very high quality too, and it seems to use some kind of deferred lighting for the nighttime scenes; and looks like some nice AO is there, too.
Now this runs on a DX11 PC, and I absolutely don't expect any current gen console to have a reasonable implementation of the tech, the performance is not there IMHO. So it's more like a glimpse of the future, now that the tech finally seems to get ironed out, it should really become a standard for the next PS/Xbox.
I also think that the art pipeline may be able to get away with a relatively small upgrade - highres source models will still be created in Zbrush/Mudbox, textures don't need any change, it's just that in addition to the normal map (which will have to remain!) the tools will need to generate a displacement map; and the modelers will also have to get preview tools for the tesselation part.
Level creation might end up a bigger problem though... particularly collision detection with the scale of displacement in this demo. Sometimes those bricks move around as much as 20-30cm, that'll be a problem. Not to mention raycasting around the scene; view-dependent methods can confuse the system and more polygons mean more calculations for the AI. Interesting problem for sure.
Anyway, it's finally a very good demonstration of what to expect.