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steven787 said:
Switch to a wired controller instead of Bluetooth.
Make the drive tray-loading or pop-up(like the PS2 slim) instead of slot.
Switch to regular buttons instead of those fancy schmancy touch sensity marks.
Switch to a basic matte-plastic case instead of glossy.
Take the power supply out, and use a brick like the 360.
Two USB ports.
No optical out (not very realistic).

Not one of those solution will reduce the cost by much at all...All together it would do more damage in PR than the cost it would safe by miles.