Actually, the problem isn't even really graphics anymore.
The problem is actually related to coding and storing all the data nessesary for all those nice hi-res graphics. It takes a lot of time (man-hours) to devise and code all those nice polygons, textures, and lighting effects. And debugging. And testing.
Then, there's the problem of space. There's the problem of the finite space involved in transfering the product (whether it's CD/DVD/Downloadable Content). How much are you willing to spend to get the prouct to the customer?
Finally, there's the problem of how much you can retail the product for. You could have the greatest game ever created on 2 DVD's, but if you have to retail it for $100 a copy to offset your costs you probably won't be able to sell enough copies to get your initial investment back.
The simple fact is, the days of being able to produce and market high-quality game titles out of your bedroom/garage are largely over. It now takes 3-5 years, with dozens of experienced artists and programmers with million-dollar equipment and developer kits, to produce even a fair/average game. It varies from title to title, but it now cost an average of 10-15 million to produe and distibute a class A title. So, it's more a problem of economics, not technology..