i'm not claiming it's doing any kind of simulation for the smoke effects, but it's clearly pushing a lot of soft particles. i can't remember seeing smoke that good in Halo 3 or any other 360/PS3 game for that matter, though i may just not know the examples.
http://www.youtube.com/watch?feature=player_detailpage&v=iD2lmN3RdEA#t=44s i'd love to see another game doing that in engine in a cutscene. again, i might just not know the example, but that's a really impressive effect.
lighting seems way more dynamic than you're giving credit for. even if it's pre baked, it's pre baked at a higher resolution than i've seen baked before, and it seems not to be a static lightmap, but rather an animated one.
and, yes. well done. you've identified Halo 3 as being a high benchmark for lighting this gen. this looks better, and runs at a full 720p framebuffer.
something that Halo 3 couldn't do.
other games achieved similar effects much more cheaply, but the dynamic lighting in Halo 3 has not, in my opinion, been bettered on consoles, and you can see exactly how expensive that glorious lighting was by looking at all the ways Halo 3 was unimpressive graphically.