"The Wii costs a lot less, people will be more tempted to buy cheaper machines"

Actually that is kind of what I meant. People are buying cheaper machines with poorer graphics instead of the latest machines. The good graphics aren't worth the extra price.

Sony is in trouble with the ps3 because people are not upgrading their ps2s. I think the sales rate of the ps3 is less than the breakdown rate of the ps2, and people are still buying the ps2.

Another indication may be the reaction to the movies Polar express and Beowolf, people thought they were creepy. And the sales of high definition DVD players has not even come close to the projected targets.

"But seeing how the latest graphics cards still get their fair share of sales"
Are graphics card sales being driven by games or by people watching and editing video on their PCs? It seems that more computer venders are dropping their "gaming" units and pushing the "multimedia market. And a big selling point of the latest cards is the type of media ports they have.

Unfortunatly I think where this technology is really going to take off is in online advertizing. Imagine... one month of free warcraft if you sit through a 1/2 hour of a virtual toyota commercial!