^^ Yes, but havent you ever seen a game with great looking graphics that you think are incredible until the character decides to move. This was the case with a lot of PS1 games - though I never owned the system. SEga CD was similar. And now games like madden, the still shots look great - but the running and jumping is aweful. While the graphics are a lot sharper - the characters still move choppy like they did in tecmo bowl - well not quite that bad. . .but the physics have not improved as much as the rest of graphics have - ie polygons and shaders etc. This stuff will be key to what you descirbed as having people "feel as though [they] are actually in the game doing all the motions."
And I agree that the next system will most likely not be exactly like wii as far as controller goes. When has nintendo ever put out the same controller (or very similar controllers) for 2 systems? Maybe the next controllers will be more like having 2 nunchucks (because a lot of people dont like the squared off remote control look of the wiimote - changing this in the future would definitely increase sales, all though I for one dont care. And nintendo will change the way the controller works, get rid of the bad and keep the good. Some developers will come along and find new ways to use the wiimote and better ways of using it to accomplish the same thing that had previously been accomplished in a different way. For instance, RedSteel may not have real time motions with its sword. Hopefully the glitches that inhibit that will be worked out by Lucas Arts when they put out the ultimate starwars game. The possibilities for Wii are limitless at this point, so the possiblilities for next gen. . . who knows? Maybe Wii will flop and drive nintendo out of business (haha, yeah right, like that will ever happen)