Every third party game looks better on the 360 than PS3, and so there's no reason to doubt that the 360 couldn't achieve the results of Sony's first party games if MS chose to invest in first party studios with the quality of Naughty Dog or Polyphony.
Interesting bit there, and the only thing I've seen you post that holds some water. Well, some of it, anyway.
Back in the 'old' days of gaming (a.k.a the 6th generation), companies were porting games from the more powerful console (the XBOX) to the less powerful console (the PS2). Companies like Ubisoft, EA, etc. After talking with some of the project leads for titles such as Prince of Persia, Splinter Cell (from Ubisoft) and others from many more development companies, the overwhelming response was that it was a dumb way to do things. They couldn't simply strip the game down and cram it onto the console; they couldn't even simply rework it so that it would work. What they ended up doing most of the time was quickly making a new game engine for the other console, and then completely redoing almost every single effect, control, anything you can name so that it would work; and even rushed this took a lot of time and money.
Now, making ports that take valuable time and money isn't such a great idea; and towards the end of the last generation devs figured out if they made the game for the PS2 and ported it over to the XBOX it would be a lot easier and a lot cheaper. The benefits should be fairly obvious.
But why is this relevant, you ask?
Because almost all third party games are originally developed for the 360. It's easier for them to get their heads around, and it's easier, quicker and cheaper to port everything almost straight into a PS3 version. Shortcuts are taken, just so that it gets out the door with minimum fuss and budget.
The difference between the consoles is only obvious when the developers actually put in some effort, and usually it's because they are only making it for one console. Currently no 360 game can touch Uncharted 2, nor Killzone 2, and if you think you've found a racing game that looks as good as Prologue when you're driving a black 430 around the London track you're just plain lying.
Other people here have explained in detail the technical sides of this (don't be a fool and just go straight for CPU names, there's A LOT more to the console than that).
(sorry for taking this off-topic mods/OP, but I believe that sharing some of my experiences could benefit some people).