There is little point upgrading hardware for any other reason than improved visuals. You can get better rendering, AA, FPS. etc, but most people are satisfied with the visual quality of the current HD gaming systems.
Are there even enough potential buyers to support a new generation of consoles? I honestly don't know, but I think they are aiming at the majority of the user base (casual), like myself who will need some serious justification to encourage me to buy a new system, and I don't think they can offer any justification at the moment. We already have HD, decent surround, WiFi, browser, motion capture etc.
The next generation of consoles will feature 3D technology. That's the next logical step, but until there is a concrete 3D standard (not just Blue-ray 3D), there will be reluctance to gamble with technological development.