And games would definitely be doing much more as well.
But it's not practical to make software that will take twice as long to run if cpus only speed up 10% every two years.
Save for extreme gamers and other more esoteric applications (e.g. CAD, video transcoding, etc.), most folks (i.e. the majority of the PC market) wouldn't benefit much from a CPU that's much faster than those now commonly fitted to the slightly-above-average consumer rig.
So, in general, I don't think software makers are holding back from making software that pushes the hardware. I just think it's more difficult to push today's more powerful hardware with typical software applications.
And, I do believe that if one were to have mass market appeal (i.e. broad utility and demand), then we may see increased PC demand again (provided the PC is the appropriate platform).
But, do you think that there are a significant number of such applications waiting in the wings for PC hardware advances, or do you believe that perhaps no such applications are ready for prime-time as of now?