The water stuff didn't impress me at all, well the reflections on it were good, but, especially the part on the large body of water, it didn't seem that cool (I'm not sure why they made that water so transparent either, as the lighting reflecting off of it should have made it more difficult to see into I would think). Some of the other things were pretty interesting. The destructive environments didn't seem that special, as other games have done probably a better job of that, of course they didn't look as good as Gears does either (well newer ones might, been a while since I've seen some of them). The thing that caught my attention the most is the crowd part, I don't think I need to explain why. I'm curious if this might enable them to do more players in co-op (4 player co-op in Gears would be excellent I think, in fact I'd probably like it more than Halo 3 even).
They talked about how their cinematic making tools were much improved, being in some ways better than Hollywood even has. When seeing the destructive environments and him talking about how the materials have different levels of tensile strength and things like that made me think how far gaming has come. A full featured engine could have so many uses beyond gaming, such as helping engineers with design (I'm sure there are more powerful and full featured tools available, but are they all tied in together, and how complex are they?), and would be great for showing off development ideas.