I think these sort of things could be very great modeling wise, you could store a nurbs surface (wich unless i'm mistaken takes less space than a high poly model) and still manage to use a very detailed model in the scene.
(and if you could control in wich direction you tesselate, the vertices would concentrate on the areas more close to the camera, and in theory no matter how close you get, they would still be very rounded right? (not by increasing the poly size, just adjusting so they are more dense where needed))
It would be very nice if all 360 games were like that, because when played on 720, they all could get even better, because it would run with higher poly counts... (ok i'll land back on earth now
)