There will always be something to "improve" on. The only difference I'm seeing is, that the jumps between one "mile-stone" and another are becoming smaller. There was the jump from 2D to 3D, some other stuff I surely won't look up, there was Doom III, there was Crysis ... I might be wrong, but I don't think we actually noticed how small the differences (publishers call them "upgrades") are, especially the ones that are being advertised so zealously by the publishers. Of course I believe the gameplay mechanics will suffer. The main announcement for the latest Need For Speed for example, was that there's a cockpit-view that will immerse you into the race by blurring the display from "Whoa, are those pixels on the asphalt?" to "I don't recall having spilled my drink on the monitor... (but I probably will, if this blur doesn't disappear and let me get on with the race)".
But all that is still okay with me. There are enough (and fortunately not too many) really entertaining games out there. All I can hope is, that they don't really get any ideas about the input devices. I was glad that nintendo failed with the few really stupid ideas of input devices they had in mind back in the day (I will also mention that strange, glove-like controller for the PS1 to hide the fact that in the late 90's I used to be a Sony fanboy), I found the steering wheels to be quite okay, the Wii input devices somewhat alarmed me, the guitar hero stuff really had me worried, and that weird skateboard thing that has been announced lately turned worry almost completely into stoicism. In other words, I can see a whole "new generation" of input devices coming and replacing the current ones before the graphics get too far.
So, let them work on the graphics as much as they want, as long as it distracts them from getting creative about the input devices. The current controllers work perfectly for me, thank you.