The reason Java (and C#/.NET) is not a viable option for AAA titles at this point is the established game engines and their toolchains are written in C++. Game development is all about getting a title on the market in the shortest amount of time, and budgets don't allow for piddling in things like a new language/engine when several are already available, work well, and have an extensive set of editors and tools backing them.
Moving to Java (or C#) would also require a new performance-driven JVM (or CLI) across the big-3 (PC, X360, PS3) or big-5 (add Wii, iPhone). It's technically doable, but not financially viable.
Anyone with low-level knowledge of both virtual machines and the current state of game engines can tell you that a JVM or CLI could unquestionably be implemented with a new game engine to beat the performance of current C++ engines. The preventing factor is time and money, nothing more and nothing less.