Heh, this subject has popped up several times, and I won't go as in depth as I have in the past...
Suffice it to say that I think if they are going for strictly in-engine cut-scenes, they should make the most of their facial animation system - because they really need to try and convey a whole range of character emotions. Regardless of what people thought of JK's cut scenes, most of the actors at least managed to convey emotion - which assisted the story-telling. Frowns are all well and good, and have their place - but so do smiles, laughs, expressions of terror, etc.
I'd also like to see them go for an all-out cinematic feel, with the appropriate cuts between different cameras, close-ups...and dynamic action. A lot of the in-engine cut scenes I've seen are static, full of dialogue, and switch between one or two camera angles.
In other words, plain dull. They deliver their slice of information, and totally fail to pump up your adrenaline and anticipation of what comes next.
At least JK's cut scenes managed to convey a sense of action, dynamism, and feeling, and in my view are actually better than some of the execrable TV series some people insist on putting on our other screens.