Oddly enough, the PS1 was a weaker machine than the N64, but the games look far superior because developers said the Sony machine was far easier to develop for. That's how Sony became so big in this business. And the PS2 was the cheap and easy way for many to get a DVD player.
I'm guessing that the XBox 360 will be the easiest system to develop for in the next gen, so if Sony is going to compete, they will have to do it with big name developers, and superior hardware.