You may have a point about Sony being willing to lose big on PS3 hardware to make money on Blu-ray: they've already shown themselves willing to canabalize the PS3 as a game machine to win the Blu-ray war.

As far as MS needing to make a profit from the games division... not too likely... they're filthy rich from their other divisions.

 Microsoft's money pile is going down and they are a very profit oriented corporation. Their share holders want to make sure the company has a future beyond Windows since their market share is dropping. MS needs to show profit on other divisions.

Also I totally disagree with you regarding Sony cannibalizing the PS3 as a games machine. Look at my game collection (signature) and look at PS3's line up for this year (LBP, MGS4, KZ2, GTA4, GT5, InFamous, etc). Sony is actually pushing the PS3 in all fronts. They do that because they can. They actually have a good piece of hardware that is much more useful than the 360. MS would be doing the same if the X360 had those abilities.

 I love my PS3, just got a second one exclusively for my Linux/PS3 CELL coding (tired of sharing with my son). You should get one crumas, you will then realize you have the lots of misconceptions about the PS3. PS3 is an awesome console, the best console I ever had. 

i think it is a bit premature for another price drop. If it does happen, MS and Ninty will have to follow the price cuts too. Overall, profits will be down for all companies of Sony decides to do this

sure all company profits will go down but Sony might want to kill hddvd and capitalize on the billions to be made off bluray.

Sony is the company with the most to win in the long run and they might do it

It would be insane to drop the price again, but who knows. It was insane to launch a console costing $600 too.

Why would Sony want to drop the price again? A $300 PS3 would totally doom the 360. No matter how low M$ dropped the 360's price then, the vast majority of PS2 owners would be ale to afford to spend that much to leap to the next gen. Also, Sony has all the momentum right now in the 360 vs. PS3 war thanks to Blu-ray pretty much finishing off HDDVD and the PS3 finally getting osme good games. This being the case, why not give your momentum an extra push by striking at the only advantage your gravest opponents (360 and HDDVD) have on you now? (price: both 360 and HDDVD cost less)
Having a $300 BD-Live upgradable BD player on the market would put the final nail in HDDVD's coffin and seriously rachet up the pressure on the 360. After finishing off HDDVD, the $300 PS3 would go on to seriously challenge the 360's viability as a next-gen gaming console with the slew of new AAA games and features coming out this year (In-game XMB, trophies, Home).
Anyway, even if this does come out, (which is not very likely) I doubt it would put a serious dent in Wii sales because the Wii and the PS3 can coexist easily thanks to their respective userbase's differences. (IMO the vast majority of hardcore gamers do not use the Wii as their primary system, though many own it in addition to one of the other consoles. I own a Wii and the only person that uses it much is my dad. Same with most of my other friends that have one)
As to being insane for doing this, how is it insane to lose some money in the short term and thus becaome the only hardcore gaming console for the next 2-3 years? Sheesh, no one ever look at the big picture. Say Sony loses ~$1.5 billion on a $300 PS3. Ummm... so what? they're like the biggest consumer electronics company in the WORLD. They can take a one-time loss like that if they make it back by crushing the 360. (which a $300 PS3 would do.......well maybe not with us Amercans....)
Either way, don't expect the Xbox to go away anytime soon. Even if the PS3 outsells the 360 by 150,000,000 to 20,000,000 in this gen, M$ will come back for more. They have never learned when to give it up and walk away from a total disaster (look at IE6, Windows Vista, and 360 sales in Japan). The fact that they command ~90% of the world's operating systems and have enough money to keep their failed gaming divsion afloat for the next 469 years doesn't help much.
Btw, just for the record, while I generally support Sony console/games more than others, I've got nothing against Nintendo or any of their consoles (except the GC, but that's another story...) Microsoft however, I have never liked and probably never will. Though I do like IE7 better than Firefox 2.0. (wait till FF 3.0 comes out M$...)

Does it even matter? The PS3 is finished!

I doubt it, the ps3 is selling on par with the 360 if not actually outselling it, sony does not need to bleed another billion, when they can continue selling and actually break profit.

I dont expect any drop in price this month or the next.

I really don't know what to think anymore. I guess all I have left is hope! :p