Next Generation has picked up a post from Tadhg Kelly's blog, suggesting that as in-engine cutscenes become more detailed, the gap between those images and photorealism becomes actually more pronounced-- and that the only real resolution to this problem is a return to full motion video for cutscenes, using real actors. Halo is cited as support for this:

Games like the Metal Gear series, the Grand Theft Auto series, Max Payne, Resident Evil, Halo and many others now use exclusively animated actors to tell their stories, costing millions of dollars in animation and time.

The problem is that they don't really work.

Myself, I posted a comment that I think moving to obviously non photorealistic styles makes more sense. Can one imagine what the cutscenes of Halo and Halo 2 would have cost to film using real actors?