I think you are right and wrong in some aspects. Gaming has a long way to go yet, and I mean a LONG way to go. You said, "Gaming cannot get any better than it currently is. In fact, it will get worse," and I couldn't possibly disagree more. I can just sit here and come up with AMAZING games that don't exist due to technological limitations (lack of powerful enough servers, AI not smart enough yet, etc). I also think you are downplaying the importance of graphics and ignoring the fact that we HAVE had some great games already this generation - there's plenty more to come. The increase in power on these gaming machines is allowing us to experience more complex games than ever before.
Look at games like Crysis, Bioshock, Devil May Cry 4, Spore... none of these experiences would have been even remotely possible on the N64 or PS1.
Probably. What I mean't by "In fact, it will get worse," is that the genres that were developed in the N64/PS1 generation have been basically beaten to death if not in the current generation, in future generations. The N64/PS1 generation by itself puts out an experience of "freshness" that while in itself seems like a contradiction because the games are very old, still explains the experience because the games were developed at the time where the genres were just being formed and there was no real redundancy. I do agree that Bioshock for one gave an excellent gameplay experience, but I'm generalizing the game libraries based on the majority of said library at this current moment. Also, as I said, I believe that the PS1/N64 gen was the first step in the direction of 3D gaming. It was not even thought of as far as consoles go at the time of the SNES/Genesis gen (I'm not a buff on the history of computer gaming, so I'm just assuming that they were at the level of 3D graphics at the point of SNES/Genesis). I also never mentioned that people should stay in the N64/PS1 generation, I am merely stating that this generation was the best as far as the quality of games and any other factors you could even consider go, and that I really don't think any certain generation of gaming will get it right as many times as the N64/PS1 generation did.
Lainge: Oblivion is not a bad game. Nowhere in my original post did I directly single out Oblivion and say it was a bad game, nor do I think so. Also, the majority of the games that you call "new" and/or "excellent" can be looked upon as terrible shortly down the road. Excellence is not something a game retains unless it really, really deserves it and I doubt that more than a handful so far this generation deserve any type of mention of "excellence". Also, I've owned a 360 for over a year and a half (make that 3 360s), and I've had a Wii for about 5 months.