Intel Shows Off Quake Wars, Ray Traced
See World of Warcraft, see puzzle games, see online mini-games.
The problem with your argument is that you are basing it off inept data collecting, like NPD stats, that DOES NOT account for MOST OF THE revenue in PC gaming (MMO subscriptions, game advertising, website games, etc.)
Graphics sell BOX copies of games, and I don't know if you noticed, but box sales have been on a decline for years.
Seriously how many more major development houses and games do we need to see fail before people understand that expensive, top-of-the-line graphics do not sell games.