From the business perspective, you are absolutely correct, which is really unfortunate for gamers.
But, if people stopped buying all these games that were just "more of the same," it would force the big companies to innovate in order to make something that actually sells.
Case in point: I played Grand Theft Auto III until I completed 100% of everything. I bought GTA Vice City, played it a decent amount of time, but never finished it. I rented GTA San Andreas, and realized that it was just the same thing all over again, got bored really quickly. I've never even bothered trying to play GTA IV.
Rather than buying new games lately, I actually have been discovering many open-source games on the PC that are quite fun--but as you pointed out, they don't have quite the same graphics experience as the big names. However, since my original argument is that fun game play is most important, while graphics should only be a nice extra, this doesn't bother me.
The only problem with all these free games I have found (for me, at least) is that these are only PC games--not that I have anything against PC gaming, I just prefer console gaming where I get to relax on a comfortable couch while I play. Maybe I should install Linux on my PS3 to combat this issue...
It would also be nice if the modern day consoles would be opened up to easily allow the use of homebrew software, as, after all, they're all just computers with different input devices, but I certainly won't hold my breath hoping it will happen any time soon.