Hardly, I find it hard to believe there are still that many people buying gaming class hardware and still using an OS that can't fully take advantage of it. Would you want things to be held back because they wouldn't run on windows 95, back when XP was modern? Because it's the same situation here.
There's a difference here.
1.) Windows XP is far more stable and just in general a far better operating system than Windows 95 (or 98 or especially ME). Windows 7 is way better than Windows Vista, but XP (in my opinion) is actually a superior OS to Windows Vista. Windows 7 is good. Is it universally "better" than XP? I don't think so, other than the silly "no DX10+ for Windows XP" shenanigans.
2.) The Xbox 360 using DX9 shows it will have to be able to run on it, so making the PC version require Vista or 7 would make zero sense. Providing DX10 or DX11 options for PC users would be fine.
3.) On older hardware XP runs games far more smoothly than 7, since Vista and 7 are far more bloated than XP. 7 may not be as bloated as Vista, but it's still bloated. This means requiring Vista or 7 will lock out some potential customers that would be able to run the game under XP but not on Vista or 7 due to those operating systems hogging system resources.
I think the game should look as good as the console versions on older hardware. Modest system requirements will help it sell to far more people. There can be options to utilize modern features and more powerful hardware, but the game should look good on a machine that can easily run Oblivion in my opinion.
I think one of the major problems with computer gaming is the constantly rising system requirements with new releases. If anything I'm glad the consoles are holding things back. A 6-8 year console life cycle means developers need to make the most of technology rather than just constantly adding more bells and whistles without thought of taking advantage of one iteration of hardware to its fullest first. This 6-8 year cycle will allow the potential pool of customers to be much larger, since the customer pool won't be limited to people that upgrade their PC every year or two or get a new one every 4 years or less. A PC lasts many people 5+ years, so the game being able to run on a powerful computer of five years ago would be a good thing, at the very least on lower settings with the game still looking decent.
As is echoed in many of my posts though, I'm all for options. I think people with powerful hardware should be able to take advantage of advanced features. I just don't think those with more modest hardware should be locked out.