Actually, Resistance: Fall of Man is 22GB or so on a 25GB Bluray. And others have also taken more than the 9GB available to Xbox on a DVD. M$ doesn't currently plan on using HDDVDs for games, which would allow 15 or 30GB discs. And Sony doesn't plan on using 50GB BDs, either. I foresee many games in the 10-20 GB range for PS3.

The quality of textures and cutscenes can be affected by greater storage, although obviously that's an indirect relationship. Although Americans aren't too into cutscenes, the Japanese are. Many of their games already have tons of cutscenes (going back to the NES), and the greater storage will allow for big RPG/adventure games with HD scenes.