Short comment about HD terminology - in Europe the terms have been fixed by EU law: HD Ready means at least 1280x720p, and Full HD means at least 1920x1080. They both also have a specific and clearly identifiable logo.
Perhaps I'm an optimist, but I think that if games like Motorstorm 3 and GT5 can run at 1280x1080 this gen, then next-gen they can probably push that further. However, at the same time I absolutely recognise that the most important thing is focus on the current bottlenecks, and rank improvements in order of importance. Shifty's point about if we could do photo-realism at 480p, that would look better than most current games in 1080p holds true for the most part. I agree strongly about the importance of lighting, animation, physics and just sheer detail to make the game-world appear alive.
On the other hand I would, however, also like to point out lest we forget that the cars in GT5 sometimes look a *lot* better than their versions on an SDTV, particularly in Full HD. GT5 is also a nice example of the importance of lighting and IQ if you look at the difference between photo-mode and in-game. Even in-game though, the image quality is something else, and I think 1280x1080p with 2xaa actually looks better than 1280x720p 4xaa
Give me GT5 at 1080p without the artifacts in the buffer effects, a perfect framerate and a more living environment, with enhanced weather effects like gushes of wind that you actually feel on your car, and with the only limits to the amount of cars you have on track being practical ones, not technical, and I think we've gotten to a point where technique is no longer very important.
It is interesting to see what would be necessary for that to happen. In the video above for example, I think they basically programmed different global lighting parameters per section of the track, which is why so few of the tracks in GT actually support weather and day/night cycles.
Anothing thing is that I'm not absolutely convinced that resolution is the bottleneck always either way. I remember a long time ago we have had discussions about 480p vs 720p vs 1080p in terms of rendering time needed, and back when Resistance for instance still targetted 1080p, if I remember correctly they ran into memory issues more than bandwidth issues - they just didn't have space for the higher resolution geometry and textures that were required.
We are hitting limits for certain applications, but the question is how close to these limits are we?