I've bolded the big difference and problem with your reasoning. That $300 would get you lots (or at least a few) downloadable games and a year of online play with them. Or that $300 gets you a PS3... with online, sure, but nothing to play on it. You're going to need to spend more money to get a game, whether it be $50 for again, more DLable games, or $60 for a new retail release. Of course, this same could be spent to further grow your 360 library, too... so it really comes down to which system just has more that you want, looking at games and features.

Oh yeah, original topic. I'd say around Natal's release. The lower price will help clear out the older non-Natal units, allowing Microsoft to have Natal bundled with most systems for the holidays.

If MS goes with Natal only bundles, which I believe is a very strong possibility depending upon how much they're REALLY banking on making it a major part of their future, we will see inventory clearing sales on old stock.

So expect to see thinning inventory on 360 SKUs prior to Natal's debut in this scenario.

If MS does do a significant price drop in the $50-100 range, which becomes a lot less likely if each SKU is bundled with Natal, I wouldn't be surprised if they drop the Arcade SKU altogether and sell HDD equipped SKUs only.

In other words, don't expect to see $150 Arcade SKUs bundled with Natal.

Even a $250 Elite bundle with Natal seems unlikely, but not completely out of the question.

Well Microsoft is probably going to try to get rid of the inventory on store shelves so they will probably do a price cut on those during E3. Then a month or two later they will anouce the natal bundle.

I think Microsoft are crazy to try and ride out the next 6 months without a price cut and just wait for Natal. Everyone knows its coming and will just wait before they buy one.

They are bundling like crazy right now. In a sense, that is a pricecut. And I didn't wait for Natal, I'll buy that separately, after all, it has it's own processor and hardware so it will work on my current rig.  

Sorry but I don't think bundling is enough to get them through til Xmas, not if they want to stay in front of the PS3 worldwide.

if they do a price cut it should come at the same time as the natal launch.

No cuts, just will add more "value".

Too late IMO, they may as well hand over 2nd place to Sony now if they are going to wait that long