I strongly believe this is a bad way to think. Primarily because of the assumption that one directly affects the other, and that by implementing fancier features like Screen Space Ambient Occlusion or Tessellation (DX11 on PC and a limited but still useful form on console) the core of the game - the quests and content - would be adversely effected. This, of course, does not hold true, and in some cases may actually be the wrong way around - the members of the team responsible for quest design and development are not the same as the ones creating the renderer, thus the two can be created in parallel, and by giving quest and content designers more to work with, better (or at least, more varied) content can be created.
The effect on atmosphere of properly implemented graphical effects should not be underestimated in any case, but most of all in an installment of a series which prides itself on such pillars as "Immersion" and creating a "believable world" - while morrowind may or may not be the best game ever created, there are few who would argue that the animations enhanced their experience, and most would agree that more detailed models and textures enhance the existing experience. There are projects, for both Morrowind and Oblivion, dedicated to enhancing the graphics through use of shaders - implementing these into engines where they are not natively supported is no easy task. Clearly there is demand for better visuals. Tessellation in particular would be a huge boon to the series, the difficulty of loading a bethesdian world seamlessly has not been one entirely overcome in previous titles, with Oblivion particularly suffering from jarring transitions as cells are loaded as local cells, not as distant landscape, and objects with distant forms, but not quite within view distance, vanish. This was improved, but not eliminated, in later titles. NPCs also typically pose an issue for even the most powerful of machines, as they must look good to somebody staring directly at them, and there are no lower detail models - meaning that every NPC is rendered at full detail whether you like it or not. This can have drastic performance hits, and while in Oblivion this was largely unnoticable, it is likely a large part of why NPC schedules never put great amounts of NPCs in the same place. Tessellation could solve both of these issues, by reducing the quality of objects to render smoothly based on distance, with no visual juttering or skipping as we're used to.
Ambient Occlusion has no real performance benefits, as such, however the difference in atmosphere it creates is not to be taken lightly, especially in a game priding itself on its newfound dynamic shadowing, where AO could "complete the picture", so to speak, by creating the shadows around corners and edges that older lighting systems tend to miss out upon.
Many other fancier effects are possible, some, like God Rays, are purely aesthetic, but all add to the atmosphere and how the game "feels". At the end of the day, Video Games are a visual medium, and those visuals are very important. Not more important than gameplay, not less important than gameplay, and not as important. Just "important".
Skyrim is looking good - so lets hope it *looks* good as well. As a contender for no doubt every "Game Of The Year" running, "average" is not enough, only excellence will do. Bethesda have previously shown themselves capable of such excellence, we can certainly hope they will do it again.
tl;dr, graphics are important, fancy effects could improve performance, content, and the scope of the game.