The controAre you forgetting Midnight Club? Extremely popular racing series. Bully was a big hit, as was Max Payne.
I did forget that Max Payne was part of their history. I was quite fond of it when it came out. Hell, I still use mouse pad that came bundled with it!
Morari, would it make a big difference to you if consoles allowed more for keyboard/mouse controls?
No. If I wanted to play video games on a locked down system that just happened to have keyboard and mouse support, I'd buy a Mac. Though the precision controls and customization are some of the more obvious benefits of PC gaming, there are other things as well. Modding comes to mind, and is the reason I still make sure that Quake III Arena is installed on all of my machines. Sadly, even that level of community involvement is drying up as developers try to control their creations more and more. Or how about more basic things, like screen resolution? I've had two hi-def monitors sitting on my desk for over a decade now. The Dreamcast had VGA support, but for the most part console games are just now starting to adapt to a reasonable resolution. Besides... a proper desk setup, with a good chair and ergonomical planning is far more comfortable than a couch.
You mention the lack of graphical updates in your post, Ian. I think that's a valid point nowadays. It used to be that video games pushed technology forward on the PC. Now however, everything is designed toward the lowest common denominator (consoles), so you rarely see leaps in technology. It's for that reason that PC gaming is more viable now than ever. Why spend hundreds of dollars on a consoles, when you could spend that money on a serviceable computer? You'd definitely get more out of it than just games and movie playback like you do on a console. Everyone owns at least one PC, and that's not likely to change. They need it to keep in touch with their friends, to read the news, to do their work, etc. Why not use it to play games as well?
The problem isn't that computers are too complicated or expensive (they're not). The problem is that the major manufacturers sell absolute junk for ridiculous prices. Outside of my netbook, every computer I own was assembled with my own hands. That's not something the average person is going to do however, and that's what holds them back from breaking free of Dell and HP.
Edit: That's why I've always had Sega and/or Nintendo consoles. They usually have a large enough selection of unique games that you simply cannot get anywhere else. With the PS360, I can get just about any game worth having elsewhere.