Those model files must be huge, if they truly store a cloud of points. It would make more sense if he was trying to push some kind of NURBS system. Actually in a way it seems like he is trying to push something like NURBS, because a point cloud file can only have so much resolution, so any data between those points must be interpolated, probably in a round way.
I don't think that model detail is really the determining factor for realism in a game anymore, and that its more lighting and texture technology (through shaders) that really makes graphics realistic.