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I'm pretty sure that the PS2 did improve Playstation games, at least graphically. I can't remember the exact improvements though. I could be wrong, but I don't think that the PS1 supported perspective correct texture mapping, whereas the PS2 definitely does. I think that might have been one of the improvements.
The potential for improvements on the Xbox 360 is larger though, because the game executable has been patched specifically for Xbox 360.
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