I'm fairly confident Rich that he is referring to the technology. From discussions in Canada it was made apparent that they are very close to what they can do each cpu cycle in terms of delivering Visuals, AI, Audio, Control/Input and maintain a frame rate.
So basically to add lots more to the AI another process would have to give up some of its resources (at run time on the console) to free up the memory/cpu cycles.
I actually believe this after seeing the horrendous shadows in GT5 as there was no more processor resource left after loading the tracks and mediocre AI
Although with new methods or re-factoring things its not impossible as with anything they will get better and smarter working with the hardware and how they program for it over time.