Yeah, the problem is that we often tend to forget how crappy the graphics actually are in Xbox and this is a good reminder that even a slight upgrade in resolution, texture resolution and number of polygons will make a huge difference when seen next to each other.
We all have memories from the past and those memories that we cherish the most, we tend to create conceptions in our minds that are usually better than they actually were in reality. This is called nostalgia, to which all of us must be quilty to some extend. I remember many n64 and PSX games looking much better than they actually are (or how they play) and when I try them later, I feel seriously underwhelmed.
Here's a plausible scenario: many people will get the x360, play for a year and think that the graphics are quite nice, but that x360 wasn't such a big step from original Xbox. Then, in some occasion they try out the original Xbox when visiting a friend or something and have this oh-my-eyes, were Xbox graphics really *this* bad -experience
You know, It has happened before.