external upgrades is the way to go but for whatever reason the console makers wont go this route. I assume because it is less profitable for them, even tho its more consumer friendly.
They just need some kind of port that is akin to a pci-e slot on a pc, where a device can be plugged in should future games need extra power.
What is looking likely at this time is that sony and microsoft will be juggling the lead in terms of horsepower every other year with frequent hardware releases. If the consumer is clever, they will reject this and the market will fail, but I am not convinced that would happen as even on here people have said they will lap it up and open their wallets for every console.
Your point regarding games i agree completely. First party games for both console vendors have been significantly reduced, especially with microsoft closing down game studios at an alarming rate. Whilst third party vendors seem to now be over concentrating on known good IP's such as COD and sports franchises at the expense of other games. It seems to now be considered acceptable for just a few games to be released every year by these studios.
Studios with lesser budgets seem to be concentrating more now on mobile platforms and PC. I assume because those markets are larger and cheaper to release on, especially with the fact they are both dominated by digital sales. Consoles are sort of stuck in the past with physical media, but microsoft tried to move them forward and were struck down hard.