There isn't a huge visible difference between the most recent Xbox games and the new 360 games for a few reasons. First off, it takes developers time to become effective on new consoles. Every console goes through many different stages of game quality. The Xbox is at it's performance peak, or at least close to it. The 360 is only just starting the climb.
Secondly, TV's haven't really caught up with the technology. If I plug a PS3 into my current TV, it's not going to look super impressive. I need a top of the line TV and games that are designed for the top settings. The TV's are out there, but they are super expensive. My TV is HD, but it's only capable of the lower resolution setting (480?)