Most games dev companies actually develop their own engines, tools and libs. Part of the reason that popular FPS games are so simple is that they are built from the ground up with MODing in mind, as well as MP. Which can often lead to simplistic games and tools for the masses to be able to play with.
When it comes to dev teams, in my experience most devs have a core group of 3-5 coders, some code monkeys to fill in the gaps, and a huge art team. If they hired more coders to develop other areas other than graphics and effects related tech, I imagine games could move on and become a lot more exciting.
I can relate to what you're saying, but for me we should be looking the other way. I see lowering the barriers to entry as an important part of getting more diverse products out there, and part of that means removing the technical obstacles and making sure that game development is instead a matter of design and art... or, in other words, get rid of the need for low-level coders. Integrated (with the hardware) middleware should really be the great creative enabler for the games industry... EA was astute as hell to recognise the genuine threat it presented and acquire and harness arguably the biggest middleware name (while the hardware manufacturers were, of course, dopey as hell to miss the trick).
I'm not saying that the very cost of developing content doesn't need to be addressed because clearly things are getting crazy. I'm simply suggesting that it's maybe time for the engine developers to get jobs with the hardware manufacturers in order that their fruits be directly integrated into the systems. They no longer reside in the optimal location.