Next-gen and realism.

First of all, "real" in next-gen games is not usually real as in real world. Is more real as in film versions of the reality. And it's obvious, we want to express our view, not the bare truth. Also it's very fortunate, because we can get creative.

Physically based or not? Is Blinn still right? What looks good, is good in Computer Graphics?
Of course he is. Graphics is about look. But we should care about physics not because we are not able to achieve the correct look by fakes (and there are ps2 games that can prove that), but because fakes are usually hard.

Cheats will always be done. We don't have enough power to not cheat, even considering the simple models of light that are used in nowdays offline renderers. But now doing "the right thing" is a great tool that helps a lot. Ease of use, was the main reason behind Global Illumination in the first place, and now it's the same for the next generation unbiased renderers. It's just more convenient to work in the most accurate light model that you can simulate, because it will usually look right without much tuning.

But always remember also that you should empower artists, don't take it to the extremes. Artists are very good at tweaking stuff, so keep usability always in mind. A fully automated GI solution can be a nightmare for artists if they can't bend the lighting model to their needs, when they need to.

So start with physics, then add hack-ability on that.

In the end, Blinn's motto nowdays has also different meaning to me. It tells me to care about perception and phsicology (uncanny valley? Crysis had to address that problem for example, we are there), as we're getting close to the limit where those components are really important.