Square-enix does make some of the best, if not the best pre-rendered cut scenes. But in this instants, the tech demo of Final Fantasy VII relied on real-time rendering to show the cut-scene instead of the norm pre-rendered. Can we expect that level of detail in real time game play, probley not...
Theres a tech demo of Final Fantasy VII displaying the power of the hardware (read:real-time), EA Studio's Fight Night PS3 ,and the one you mentioned "Unreal Engine 3"
I believe it all comes down to what you need the console too do. PS3 seems to be more powerful than the Xbox360 due to the cell (1 teraflop difference is big). Xbox360's online play i think will most likely be better than PS3 (too earily to tell,maybe sony learned from the PS2 online problems)...