There's a nice little piece on Reach over on Edge about how Bungie is stretching the Halo engine and really maxing out the 360 to get the best performance. In my mind, it really shows. Reach looks fantastic and the 'Impostor' tech is shaping up to be a terrific idea for cramming tons of soldiers on the battlefield with no loss to the frame rate.
If you don't know what 'Impostor' is, it's a new system developed at Bungie that substitutes highly detailed models for simpler ones when they're seen at a distance. In short, that Jackal taking pot-shots at you from up on the top of that Covenant sentry platform has way less good looks than the Grunts that you just wasted right in front of you- only you never notice the difference. And if you were to approach said sniper? The engine would scale him up to look appropriatly more awesome the closer that you get. Nice stuff.
If this truly is the max level of graphical quality for the 360 though, I have to wonder how far away a neXtBox could truly be. Might we see something announced at e3? Maybe something incorporating the Natal tech natively? It certainly is possible, but I doubt that Microsoft would want to temper any excitement whatsoever for the impending 'Holiday 2010' launch of the Natal with a new console- even if it were to be a ways off.
E3 2011 though? I'd be shocked if there wasn't something being cooked up for that.