I'm more inclined to believe the Gamer Attention Span problem is a larger issue than ballooning budgets (the latter being a symptom of the former, not a separate entity,) considering the Wii's spectacular rise that flattened out once it wasn't new and innovative anymore. Not that it was ever innovative in the first place, it just sold itself on giving the impression it's the closest thing to virtual reality we'd see (which is pretty sad, in and of itself.)
Likewise, I wouldn't be surprised if the stories going around about how Kinect and Move are exceeding all predictions are completely true. Ripoff BS though it may be, it's New and Shiny. It's why everyone is trying to push 3D, but the current price tag is enough to overshadow interest on that.
There isn't really anywhere else to go, though, which is why Sony and Microsoft jumped into motion controls instead of looking for real innovation. It's often said that "graphics can't get much better," which is a load of crap. Games are so far from being able to mimic reality it's ludicrous. Problem is, the industry has trained most of its consumer base to be completely oblivious to the more subtle nuances of presentation, because it was easier and cheaper to market and to develop simple flashy improvements than it was to do realistic body language or non-restrictive environments or, hell, even just anti-aliasing. Now, it's a bit of a trap; development costs are already ridiculous enough that another leap of improvement like we usually see between hardware generations just isn't feasible and wouldn't produce a large difference, while focusing on things that could help immersion and getting players to care more about any given game are a nearly impossible sell.
I like to think it's possible this problem could manifest in a downsizing of the "casual hardcore," things like Halo that are made halfway between the lines for Srs Gamrs but simplified to account for the original generation of gamers growing up and having less time to spend on it, people who need a constant stream of New and Shiny to maintain their interest, in favor of niches becoming more mainstream, the ones who consider gaming a hobby one devotes time to and not a time-killer becoming more important as a customer base without the need for new gimmicks around every corner to enjoy themselves. Sadly, I doubt it's likely.
NOT THE BEES! NOT THE BEES THEY'RE IN MY EYES