I don't see how Sony is going to pull out of its rut anytime soon, or ever. A lot of people say that PS3 will regain momentum later on, when developers learn to 'harness the console's full power' (whatever that's supposed to mean). Unfortunately, good graphics != good game, or even bestselling game. A lot of the stuff that has come out on PS3 is already much 'better-looking' (read: photorealistic) than anything that will ever come out on Wii. Has that stopped Sony from sinking into the quicksand? Are better graphics really going to stem the PS3's decline?
A gaming console is really nothing but a tool- a paintbrush, a canvas, a sculpting tool. It's up to the developers to make use of that power and create compelling games. Just because I go from fifteen to twenty (or twenty thousand) tubes of oil paint on my pallet does not make me a better painter. Going from 10 to 100 different paints might allow me to better express my creative vision...going from 100,000 to 1,000,000 different tubes is not going to help any artist in real life. Sony's mistake was to lose the big picture and create a mile-high canvas with billions of little tubes of paint, sitting there for artists (game developers) to take advantage of. Eventually, you come to a point where more tools result in smaller increases in opportunity: you could theoretically do a lot with the resources (the PS3's hardware assets) at your disposal, but the resources aren't going to paint pictures (make compelling games) by themselves.