As beautiful as this demo is, I think the push for realism has harmed the game industry more than it has move it forward. One of the few developers in recent memory that has managed to focus on both visual fidelity and gameplay is Bioware with the Mass Effect series; for the most part most developers aren't this successful and end up producing beautiful but lifeless, dull games. Also consider that producing art asset…
I think another great exception is the elder scrolls series by bethesda. Every time I see new physics engine, better AI, or better graphics, I think, 'What can Bethesda do with this?'
Apart from the graphics, the shipped game was lifeless and uninteresting, Morrowind was orders of magnitude more original, more interesting and (even though it was on a half-dead continent) more full of life than Oblivion.