Volumetric blood that acts like liquid, just like in Killzone, except the blood would stay active and not turn into a decal when it hits a wall.
You said "I can only imagine what they could do with next gen hardware". I gave you an example.
I played God of War II recently & it's a great game but if they are smart they'll make GOWIII available for the Xbox 360 as well.
Since Jaffe is also making the new-ish Twisted Metal game he should make Kratos an unlockable character where he rides a chariot of death.