Okay, so maybe it's not as harsh as the headline sounds - but Rockstar recently acknowledged in an interview with OPM UK that the lack of a hard drive in the 'cheap' 360 SKU combined with the lack of Blu-Ray is limiting what the team can do in GTA IV. Unfortunately, this effects the PlayStation 3 version as well, since they are aiming at both versions of the game being identical.
This is one of the first times I've seen a company acknowledge that making a multi-platform game ends up limiting what they can do. Normally that sort of talk is up to fanboys - not Vice Presidents of major companies. It's a shame to hear that the 360 is limiting what GTA IV can become, but hopefully Rockstar takes a queue from The Darkness and adds-on a bunch of content to fully utilize the space that Blu-Ray offers.
Oh, and to be fair - Rockstar also said that the PS3 offers it's own challenges that they have to overcome (cough, the Cell BE, cough).