The simple notion that launch games aren't optimized to use all three cores and the R500 is reason enough to believe that visuals will get increasingly better. On Xbox1, most devs probably knew how to program for a PentiumIII and a GeForce3. How many devs do you know that can program for a triple core G5 variant with the efficiency they show on Xbox1? Shit, I'm surprised PGR3, GR3 and DOA4 look as good as they do.
As for these Engine demos that are being put out... It's my opinion that 360 devs just don't have the time to make "pretty picture" movies using their engines because launch is so close. They have actual games to make... and a deadline set in stone.