I'll stand behind the quality argument as well.
I've got many friends who spent significant time (semesters, extended vacations, childhoods, etc) in Europe. In many of the countries, even the UK, quality is paid for. People are perfectly happy to spend a lot of extra money -- even twice as much as a competing similar product -- to get one they know is a quality product. People have more expensive shoes, spend more on furniture, spend more on things that are expected to last a long time. They don't just buy the cheapest one because they can't tell the difference. They buy the brand that they've known to produce quality, honest products.
Microsoft is an American company with an American mindset. It's no fluke that the 360 is the least reliable home console in history and perhaps the least reliable piece of electronics in history. Microsoft is a low quality company with low quality products. I'm not slagging on them; this is simply a reflection their overall strategy. They rightly believe that Americans are short sighted and buy cheaper products over quality products. They want to believe it's just as good, and they're foolish enough to believe lies and marketing-speak willingly so it can help them rationalize their poor purchase.
Microsoft has the additional problem of denying reality. The only area they're successful is their software monopoly -- Windows and Office. Everywhere else they fail, and yet they paint it with a rosy picture. They underestimate competitors ("Google is a one-product company"), they underestimate products ("Android is just paper"), and they lie to themselves and their investors about situations ("Sony isn't gaining any momentum, and we found a way to craft some statistics that agree with this statement").
Microsoft does not have a chance in Europe this generation because their lack of quality is well known there where it is one of the top factors when products are purchased. Here in the US, where people want to believe the 360 has been fixed and that the reliability issues are overblown, MS has been able to bounce back a hell of a lot better.
I got a 360 because I'm willing to fight through the customer service to get it replaced and accept that as part of the cost of the console.
