I think it's implicit in his point that going forward, in order to improve the fidelity of graphics beyond what's currently available, it will cost development studios in the millions of dollars more. This has been stated by a handful of top developers over the last 12 months. This just isn't viable on the PC as an exclusive platform. We have talked about this on our forum on several occasions. BF3 is going to look amazing on the PC, but at the same time it will also probably be the best looking game on the consoles too. If you google BF:BC2 on the consoles and PC, they look nearly identical. So it will be interesting to see how well BF3 on consoles compares to the PC version.
As to your point of FC1 and Crysis 1 pushing the envelope when they were released, the graphics were still far too primitive at the time. Doom 3 was easily one of the best looking games when it came out as well. However, now to go far beyond Crysis 1, you'll probably need 50 artists alone and require hardware that isn't even available (try adding DOF, dynamic lighting and Tessellation and realistic physics and you'll soon find yourself running at 10 FPS with Triple-SLI 580s). There must be a reason why so few developers are pushing the graphics envelope; and it most likely has to do with development time and $. Otherwise, almost all developers would just focus on making the best looking games if it was not that expensive. Surely, this would offer a significant comparative advantage among the competition. We can also deduce from that that the average consumer is pretty satisfied with the current state of graphics or they would have stopped buying the games on consoles and certainly on the PC. Yet, people still buy games since 2007 when Crysis 1 was released and only a handful of modern games look as good or better (Metro 2033, Witcher 2).
Finally, we don't know how much $ Crytek really made from Crysis 1. It could be that they spent a lot of $ upfront and barely made any $ off Crysis 1, but built up their reputation and brand so that they could secure development on consoles and finally make $ in the 2nd round. But already established developers aren't going to spend 3-4 years to design a game to "break" into the console market, since they are already there!
Also, Carmack mentions how it was extremely important for the game to maintain 60 fps. He doesn't deny the fact that they could have pushed the graphics far beyond what's currently available in Rage 3D, but then it wouldn't be running at 60 FPS for many years to come. Unlike Crysis 1 where you didn't really need 60 fps for smooth gameplay, id games are famous for the fact that they run very smooth and look good on release date. No one is going to care about Rade 3D if it runs at 15-20 FPS on a GTX580 today and it takes 5 years to max it out to 60 fps. I also agree with his point that while graphics are important, gameplay / creativity / storyline, etc. are far more important when it comes to making a hit game. I find that PC gamers tend to focus on graphics way too much and then complain that the game runs smoothly on a single GTX580. Not everyone wants to spend $500 on a GPU every 12 months.