I'm fine with games improving their graphical standards, mainly because my PC has handled everything I've ever thrown at it on max-settings, but I agree at some point you haver to think of the littler guys.
While it's great to have graphics available that the people with the bigger and fancier builds are beefy enough to enjoy, you also don't want to force people to pay hundreds of dollars to upgrade.
This is where I think game developers can take a hint from EVE Online. In this example, EVE is a game that's been out for years, and it's graphics, while decent, have been far surpassed in quality in recent years. EVE is a game that constantly updates and releases free content expansions every year or so. The latest expansion they've come out with is EVE Trinity, which finally, along with adding all sorts of new gameplay features, brings the graphics of the game into standards of today's gaming, which requires you to have no less than one monster of a computer to handle.
Now, the developers could have just said, "if you can't handle these new graphics by now, piss off and play solitare", but instead of forcing everyone to comply, they made the "premium content" for the graphical expansions optional. In fact, they made it a seperate download from the Trinity client altogether, allowing the default to be for the game to use the classic graphics while still retaining all the new gameplay advances. Therefore, the bigger fancier machines could let their dual core processers churn to their heart's content, and the people who couldn't afford these luxuries still get to play the game with the content their familiar with.
This of course, instead of demanding a PC upgrade, offers it as a friendly suggestion. "You don't HAVE to comply to the new premium graphics, but if you ever want to experience the very best, it's always here if you want it

"
I can agree that most PCs that do gaming should at least be able to handle Half-Life 2 graphics easily, and it should be downright unecessary at this point to use graphics inferior to this, because even the most basic $400 computer nowadays should handle it. But I also agree that if all a new game offers is improved graphics and forces you to conform to their system requirements, then you shouldn't have even bothered making a whole new game. If the new UT game adds nothing new to gameplay, then why bother calling it a new game? Do what EVE Online did, sell it as UT2K4 graphical expansion, add new maps or whatever, include two discs int he box: one for the standard graphics edition, and one for the new graphics.
If developers did games this way, it would also prompt them to focus on gameplay AND graphics, because if you offer both old and new graphics in one, then people who use the old graphics are going to expect that you've made actual improvements and additions to how the game is played so they can enjoy some new stuff as well.
I'm kinda' ranting here, but I hope you can agree with me here.