The way I see it, it's like if Forza 2 was released on PS2. It could have the best physics in the world and be a really good game but honestly, if it had last-gen graphics, it WOULD get to you after a while.
I recently moved the PS2 from the family room into my room, because I wanted to play the past GTAs (which I used to love, but never finished). Five minutes into GTA San Andreas I was thinking "I just can't get into this, it looks fucking awful, blurry faces and jaggies everywhere". Which I know is a terrible thing to say but it's true. It really puts you off, when you've got used to seeing everything in pin-sharp clarity.
Gameplay is paramount, of course, but if the game looks utterly average then you're going to be disappointed, surely, when we've been in next-gen territory now for a year or two.