In any case, one major advantage I've had with PCs is, well, forward compatibility. Five years down the line, I might not still be able to run stuff at max graphics, but there's a really good chance it'll still be runnable at medium or low settings. For a console, forward compatibility basically doesn't exist. I can't stick a PS3 disc into a PS2 and have it work. I can stick quite a few PC games made in 2006 into computers made in 2000 and have them work. Perhaps not perfectly or at max quality, but it'll still do a pretty drat good job of functioning. And I can reasonably expect a top-tier computer now to still be able to play whatever comes out two or three console cycles from now.
Still, it's not impossible that we see an upward shift when crossplatform development doesn't have as heavy a console yoke around its neck. Be interesting to see.
You probably can't use that machine to play DirectX 10 and 11 games right now, unless you've replaced the graphics card. ATI didn't even support DirectX 10 until the 2xxx series, and the x800 was out in 2005. ...Of course, DirectX 10 didn't exist until Vista, and Vista wasn't released until 2006-2007ish, and Windows 7 (for DirectX 11) until 2009. Windows 8 has its own new version of DirectX (11.1), but I'm not aware of any games requiring it, as it's so new and the user base is smallish (
steam's latest stats show 8.04% for windows 8 64-bit, which is smaller than XP's yet larger than Vista's 32-bit and 64-bit combined. Win7 64-bit has 55%).
I'd guesstimate three console cycles from now as being either between 8-16 years, or 'companies start releasing consoles midway through other companies console cycles.' In any case, you'll have the same issue with not being able to run DirectX-version-restricted games without a video card and OS replacement if you wait 8 years from today, I expect.
As for graphics improving or not, even if there's resistance to trying to make things more photorealistic (somebody has to do the work on the models, textures, etc, and will anyone really care if it isn't some kind of porn game or something?), there will be other uses for GPUs: Simulating the environment, for example, as is already done, physics, cloth, etc. Those can all get better. Better physics can only be a good thing.
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(Max setting? Consoles games don't have graphics settings.)
"XBox controllers work natively with windows" - no, they don't. Windows can't see them at all (intentionally). Not unless you got a wired one, and that's not what new xboxes come with.