No doubt some amazing stuff can be done if they pushed the graphics to the limit, but remember, Telltale is trying to make the game as accessible as possible to everyone. That means Small Download Size, Common Technological Hardware, and Ease of Use. This almost makes their games follow the "Casual" game category.
I honestly would love to see someone use the UDK just to replicate the Telltale Sam and Max games with amazing visuals. By amazing, I don't mean excessive use of Bloom, Really Reflective Surfaces, Plastic looking characters, etc. I think if a bored Art Director helped out, then things might look right.
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