Let's say by 2027 when the next generation gets released we get consoles that are barely an upgrade over current gen (maybe 20% better). For some reason, they include a cool gimmick with their new console so the games aren't compatible with current gen anymore, meaning you'd have to upgrade to keep playing the latest exclusive games. Let's say whatever gimmick they come up with really enhances gameplay in a different and innovative way. Both machines launch at $349.
Would you still buy Playstation and/or Xbox consoles if they followed Nintendo's strategy?
I'd stay on PS for the exclusives, but what you mention won't happen.
First because Sony and MS are making an effort to make their consoles forward compatible: grouping their catalog from all generations, streaming, PC-ish architecture... all seems designed to make consoles compatible with all this.
They could do something like to make them hybrid, so the jump in horsepower in that case would be minor, but I don't see it happening. I think they'll continue with tthe same current focus and will leave the portable market for Nintendo and the PC handhelds.
I think in the next gen they'll highly improve streaming, VR, RT, real time illumination and SSD reading speeds. We'll see more (or closer to) native 4K resolution games and more (or closer to) 120fps games. Plus during this gen will increase the F2P GaaS in console and will start migrating thowards the end of the generation P2E (specially in mobile and PC), which will explode (specially in consoles) in the next gen. Well see an additional option to buy any game in PS and Xbox: in addittion to in retail or digittal, to buy games to stream them (as in Stadia or a few Switch games).
I see the innovations in gameplay and game design coming from VR, P2E and the paradigm shifts described by Cerny in his talk about the PS5 tech reveal. These new possibilities I think will start to shine in the next gen. Since both are growing their amount of teams (in the case of Sony, mostly hiring a lot and creating new teams inside their studio, and in the case of MS more via acquisitions), I think they'll release way more games so will also release way more IPs which will lead to new ideas. They will also open more to mobile and (via acquired 3P publishers) to full multiplatfom.
I don't see them getting stagnant like Nintendo on mosty a few IPs from many decades ago and investing on low end visuals. Their money comes from high end AAA games with realistic visuals, so will continue invesiting them. Gimmicks are only gimmicks, by themselves they don't improve gameplay and don't imply innovation. This gen we saw stuff like haptic feedback, 3D audio and adaptative triggers. They are nice additions, an improvement and maybe innovation, but I think they are only a gimming that doesn't change mostly anything.
As an example motion controls meant crappy gameplay to perform actions that could be mapped to a button press or analog direction, and to go back to rail shooters from generations ago. They are starting to shine in VR when properly mapping hands fingers to track more natural and intuitive controls but the related design still has to evolve to take full advantag of them in (VR) games.
Low end visuals only means devs can't show certain level of detail, realism and subtle emotions. Innovation, focus on gameplay etc. can also be made while using top tier visuals, as seen in Dreams, Little Big Planet, Journey or Death Stranding to name a few.