I specifically cited PS2-era graphics as what I consider good enough for ANY modern game. Note that doesn't mean draw distance or game world size. Fancy dancy tessellation or even having shadows *at all* is icing on the cake to me.
Heck N64 graphics are probably good enough for any video game concept to fully function normally (note I mean the graphical style not all of the hardware constraints of that era). By saying PS2 era I was actually being very generous. Yes, video is required for a video game to function... that doesn't mean the video must be fancy dancy top notch for the game to function. I'd be lying if I said I didn't like great graphics, but that's nothing but a bonus.
I don't need super graphics for immersion, and I'm not going to have a suspension of disbelief for a video game. I know it's not real, and that doesn't stop me from being immersed in it. Really I'd be worried if I had a suspension of disbelief while playing a game. From the way people talk you'd think it was impossible to get immersed in a game like the original NES Zelda, much less the plethora of top notch SNES era games. To think people call Oblivion's graphics so bad that they just can't get immersed in the world seems very picky to me (no offense).
This is why I have both PS3 and Wii games and the PS3 does not get an overwhelming amount of support from me over the Wii. It's all about the game content and a game like Super Mario Galaxy 2 or Donkey Kong Country Returns stands just fine on game play and decent graphics alone compared to the outstanding graphics (in comparison) that the PS3 can deliver.
In short: Again, basically any video game concept can be adequately implemented with PS2-era looking models and environments. That's pretty much a fact. Everything else is bonus to me. Oblivion completely blew me away with its graphics and physics. If Skyrim equaled Oblivion for graphics I'd be happy. As it stands it's likely going to look better, so I'm happy! And yes, I think everyone can agree that both together is awesome.
No, that's not a fact - it's held true so far because nobody has had significantly more power to play around with. "640k will be enough for anybody" thinking smacks of nothing but ignorance, and to say that there is no possible use for additional power shows naught but a lack of imagination. Even without any great enhancements, running games at higher resolutions lets you pick out more detail - essential for, for example, a puzzle game that does not with to rely on the player hitting a button to get a clue. Importantly, your thematic tools are limited in many areas with PS-2 era graphics - for example, while the "Super Realistic" theme may be getting old, it's an impossibility with such resource constraints. Showing large worlds is also almost impossible without pre-rendering, significantly weakening the gameplay opportunities. To think that "Nobody has done anything more, so nothing more can be done" is a way of thinking that has existed for a very long time - come the 1900s we had "discovered all there was to know about science", for example.
A video game doesn't need much to be good. Tetris stands the test of time, pong is almost farcical in its simplicity and yet can captivate for hours. However, we can do better, and we should do better. Bethesda's vision of nirn does not include pop in, muddy textures, or a lack of many NPCs in one area - and now we have the technology and resources to eliminate, or at least mitigate, these issues. They may not be essential for a good game, but they are essential for realising their vision, and they are essential for creating an absolutely believable world, instead of a sort of believable world.
Your third paragraph specifically makes me wonder whether this is a kneejerk reaction or whether you actually read my post, especially in light of me specifically fingering Yoshi's Island as my "Best Looking" game of all time.
Just because we have reached a "Good Enough" does not mean we should stop striving for better things, especially when some of those better things have benefits outside of pure graphical fidelity.