It seems to me that the engine designers should spend more time making good graphics easier. I appreciate a beautiful game. I really do. But the amount of time and energy spent really takes away from the rest of the experience. If I'm not mistaken, this is precisely why so many game developers use the Unreal 3 Engine. It's easy, fast, doesn't cost a hell of a lot, and looks pretty good. So, the question is why don't we do more of that? Making good graphics take less time means we have more opportunities and funds to spend on gameplay, story and fine-tuning. Not to mention precious, precious time.
EDIT: (for added content) I think videogame graphics are fine the way they are. What we really need to focus on graphically is hardware. One of my favorite parts of GTAIV was how the engine interacted with the game world. It was very unpredictable, and that was what made my city-wide rampages so fun. The problem was that without the extreme optimization, it probably wouldn't run on anything today. (If you watch replay videos, you can see that literally everything behind you in the game world disappears.) What I'm thinking would be the next big 'graphical' improvement is scale. I want games that take place in enormous scale. Five square miles, densely populated. This obviously isn't important for a lot of games, but I think that most games are fine the way they are. They just need a bit of polish.
The next big thing will be animations. One of my favorite parts of the Assassins Creed series (one of my favorites) is the animations. I don't know if it was motioncapped, or if it was done in-house by a very, very dedicated team, but it was fantastic. If we want to capture someone's personality in the game (like the guys at Extra Credits keep yelling at us to do) then we need to improve animation.