Find: How close are we to truly photorealistic, real-time games?

Still a long way to go, tim's right. But closer. We we'd a paper on similar themes: 

The paper argues that pixels may not be the right primitive at this scale of realism. 

Also, I think Tim's right to mention modeling as a huge challenge in this context. 

Ars Technica

Every graphical and technical advance the game industry has seen from Pong to Crysis has been a small step toward the end goal of a real-time, photorealistic 3D world that is truly indistinguishable from a real-world scene. Speaking at the DICE Summit Thursday, Epic Games founder and programmer Tim Sweeney examined the speed and direction of computing improvements and determined that we "might expect, over the course of our lifetime, we'd get to amounts of computing power that come very close to simulating reality."