The sad fact of the video game business is that it is a business. It always comes back to money.

You keep seeing repetitive uninspired games because the market keeps buying those games.

You keep seeing games without branching story lines because that's content that half of your user base won't see. Most of the story and cinemas are done at the end; why pay for a cinema that can't be used because Level X wasn't fun? At the run up towards hitting a ship date time and resources start becoming tight and it's easier to start cutting things then try and make them work. Something that less then 70% of the users see is one of the first things dropped. (Bioware being a fantastic exception as they've made their reputation on branching stories)

It takes on average around 100 people 2 years to make a triple A game. During that time they'll have at least 2400 game ideas (average once a month per person). Not all of these ideas are good, most are risky, and some are safe. Now a good studio will evaluate the ideas and find one the employees are passionate about. A lucky studio will be able to make the game they are passionate about. An unlucky studio will have to make the game that whomever is paying the hundreds of millions of dollars to fund the game feels would be the best return on investment.

If you want innovation stop looking at games that are big enough to be sold in boxes. No one is going to take an interesting risk with millions of dollars. But you'll find people who are willing to take a risk with a few thousand because they're passionate about it. Granted these indie games are unpolished but they're where most of the innovation is.

While I agree with your post in spirit I have to severely disagree on it's scope.

You're forgetting that it's keyboard and mouse. A mouse could easily mimic the analog control required for turning and acceleration. It lacks the tactile feedback of a thumb stick but a HUD indicating turning/acceleration position could give that same feedback. Since other graphical elements need to modified between consoles and PC I'd consider that a slight win for consoles.

This is solely a software limitation. There is no hardware restriction stopping someone from plugging in 20 USB keyboards and mice in to one computer and using them.

You're kidding right? I'll give consoles fighting and driving/flying games, but PC's keep FPS's, anything with a complicated interface (RTS's & MMO's & most God-like games (Sim city, dwarf fortress, etc.)), puzzle games (bejeweled and puzzle quest style because it's faster to click on something then it is to move the cursor and myst). Adventure games are a toss up depending upon the game's needs and design.

The market has proven that people will pay a decent amount for an extra controller with Rock Band & Guitar Hero. Granted that is on consoles, but there is no real reason why the same couldn't happen on PC.

In general controllers excel at multiple degrees of analog control (a mouse only has two while a 360 controller has 6) and simplified interfaces. While a mouse and keyboard excels at precision of analog control and sheer number of keys. Each one is better at somethings and worse at others, but it's a pretty even split. Though that may shift if Supreme Commander can get a decent interface on xbox and as games move away from text communication to voice chat and text to speech.