First of all, this:
...is incredible.
Secondly, remember that the Santa Monica Studios are effectively the landing pad for
everything that Sony is doing here in the US; they help with core tech, with PSN projects, with optimization, and so on. Even just taking the first God of War game, their ability to finagle some incredible visuals out of the hardware was damned impressive, and I don't think it's unreasonable to expect those that were leaders in the medium to repeat their performance heading into the next generation of hardware. Naughty Dog proved that confidence in technical prowess needn't be ill-founded.
That said, the Kinetica Engine had come a looooong way by the time they plied it toward God of War, so there could definitely be hiccups here and there. Still, going by the difference I've seen in just a few months' span, I'm fully expecting GOWIII to blow my peepers out the back o' muh head when it finally ships. Hell, I'm just excited about seeing the inevitable preview build trickling in (hopefully) early next year or at the end of this one. It's been a wider gap now between when I first saw the game and made the "eh, it's just God of War in HD" comments to seeing what I did at E3. There's bound to be some major improvements made in that time, and the GOW team tends to implement changes to the game in a sweeping, across-the-board fashion rather than just polishing up one little section of a level -- at least in my experience.