People are sort of dancing around the question of consoles here. The faces (and everything else) do indeed look phenomenal in Crysis - way more so than HL2. But Crysis was made to push the bleeding edge of game graphics, a goal which has turned out to be out of step with the current focus on console development. The status quo is all the rage these days. Think about it: CryEngine2 itself is already 2 years old, and still no game has even matched its capabilities, to say nothing of surpassing them. I can recall no other time in my 20 years of gaming that we have gone a whole 2 years without a new graphical milestone. Most games seem content with the same rubbery, normal-mapped faces we've had since Doom 3.
Games these days are made for the same four-year-old hardware, as they must continue to be until the hardware changes. The modularity of the Source engine means that it isn't that far behind most modern engines, and the important point here is that it isn't going to get any further behind until the next console generation. At which point we can probably expect Valve's next major engine release.
In any case, I certainly hope Ep3 will be released in the current engine. It looks fine, and I think maintaining the visual continuity across the story arc is important. They can do a major visual upgrade for the next story arc.