"id has previously stated that the Xbox 360 version of Rage will look worse than its PC and PS3 counterparts due to the limitations of the DVD medium. The studio had hoped to circumvent this by spreading the 360 release across three DVDs, though Microsoft's royalty rates apparently make anything beyond two discs financially impracticable."
"we originally wanted to have around 5 or 6 smaller wasteland environments but later decided instead to have 2 larger wastelands. Mostly because we were going to be shipping on two DVDs for the 360"
Yeah, sure sounds like the 360 limitations had nothing to do with cutting back.