well actually maybe game budgets could use a bit of erectile dysfunction. Or at least some different pricing structures.
When every game has to start being sold at the same price, you see publishers trying to make that one safe, successful game that sells to 10% of the install base rather a bunch of games that sell to 1%. This is why we get so many shooting and racing games of course.
Probably the best solution is to keep going full steam ahead on the graphics whoreness but to have the big-budget guaranteed successes like GTA, COD, Halo, etc being sold for up to $100 and the new innovative games being sold for a fraction of that, but still making a profit because they have more ghetto Wii-level graphics. Even though consumers apparently like the Wii, I'm not sure if they could adopt such a change.