I'm not completely disregarding things like better shading, particle effects and everything else lots of these PS3 games bring to the table. So let's be clear on that. I think though that the difference between my opinion and yours is the importance we each place on clarity and smoothness vs special effects. I'd argue that Shindler's List on Bluray looks better than the Avengers on DVD even though on almost every level the Avengers is technically more impressive. The former has great cinematography and set design and on Bluray it would be very clear.
I think FFXII had good character design and great big open environments and when you put some horse power behind it and it can really show what textures it did have and you get the clarity I was getting I really do think it looks better than FFXIII running at sub 720 on PS3. Wandering around the main city from FFXII again after finishing XIII-2 really sent home to me how great XII can look maxed out. I'm positive the same treatment to XIII would be even more impressive, of course.
I'm being somewhat hyperbolic with the Mario stuff, but that clarity and smoothness means a lot to me and really impacts my impression of a game. Nothing on PS3 is that smooth, it just can't be.

