But that's all about RAM. RAM only limits how much content can be in use at one time, storage is independent.
DVD9 is definitely a lot of data, but look at the limitations. Take Fallout 3 for example. F3 fits on one disc, and look how much content there is. Still, if it were on a 20gb disc, do you think they would have made more varied rocks? How about some more character models? Maybe they could have more than 8 voice actors (still better than Oblivion's 5 or so).
We still have a lot of room for expansion. Modern game textures really aren't that big, so that can get a lot better. The problem is, photograph-resolution images aren't small, they're several megabytes each. Instead of that wall texture being 512kb, it's going to be 5mb. Multiply that by 1000 textures, and you're running out of space for everything else. Audio can't get much better, and it's not worth the indiscernible quality gains. Geometry will gradually increase, but not so much as bumpmaps and such, which will also reach photograph-resolutions.
In essence, another generation with DVD as the primary reading medium won't give us better looking games. They might play better with the new controls, but the content is going to be the same as what we're seeing now, just rendered at a higher resolution. For comparison, play Doom at 1920x1080 with modern mouse-and-keyboard controls.
Because your ISP doesn't want people downloading 25gb archives. Time Warner is seriously testing out 5 and 10gb monthly limits out west.