I think raytracing has the potential to be a big leap forward. Real-time lighting and shadows are still incredibly limited, and most games are only able handle dynamic shadows from a hand-full of light-sources at a time. I think we don't see the difference yet because baked lighting gets a really good result, but I think after we live for a while in a world where every flickering candle, and every emissive texture in a game is a fully-fleged, shadow-casting, dymamic light source, then we are going to look back at current gen games and see how static and artificial the lighting is.

But I do agree with you in general that more advanced simulation is a huge, largely untouched opportunity in games.