Valve are great designers. They polish games to perfection, and create truly interesting scenarios. That is the situation on one hand, and that hand has nothing to do with the completely separate hand of graphics. There very different beasts. We all appreciate beautiful graphics, but the gameplay core is the most important part. So even as a Valve lover, I have no problems with this criticism.
Truth is, yes, Source is showing its age. Putting there game in daylight does a huge amount to exhibit the shortcomings of the engine, where nighttime and film grain of L4D1 went a long way towards replacing graphics limitations with artistic style: Kind of like how Madworld for Wii looks as crisp and clean as a 360 game, because the art style covers up the shortcomings. Certainly, Source doesn't tower over the competition like it did back in 2004. However, though no longer impressive, it doesn't look bad, and it is still pretty great in terms of facial experessions and physics. And it has also been tweaked and honed enough that it can still pull of some impressive stunts, even if sheer realism suffers: The weather effects in, "Hard Rain" campaign for L4D2 were downright amazing. Its no longer great, but it is acceptable, and what with hardware advancements coming to a slowdown, not to mention the likely length of this console generation, it seems unlikely that they will work really hard to make a new engine, especially an engine that so many developers and modders adore. My prediction, based on pure hearesy, will be that once they come out with Episode 3, they will take the Source engine, and give it a massive overhaul. It will probably look as impressive as the Cry3 engine, and be a lot more scalable. But I don't think that will happen until after they get a bunch of products out of the way.
