Since a few other people have spoken up, I'd thought I give my take now.
First of all I think that last gen would have played out the same way, the people who bought Xboxs would have bought GCN and PS2 in proportions that wouldn't have significantly altered the market. Probably 80 to 90% would have bought PS2, 10% bought GCN and a small number either wouldn't have bought a system or bought multiple systems in the real world and would have stuck with those other sytems in this ficticious world.
The biggest difference to last gen would have been when it ended. Without MS in the game, Sony wouldn't have launch for at least another year, more likely 18 months. Nintendo, who hates to be the first to launch likely would have waited as well, perhaps being able to include 1:1 wiimotes at launch.
This gen then would likely have only just started, perhaps having started as early as late 2007, but likely not having both consoles available till mid-2008. While Nintendo would likely be getting the same numbers it has, perception would be totally different as instead of being the run away horse out of three, PS3 would likely be no worse than trailing by 60% to 40%. The extra year would mean the PS3 would have launched at a more reasonable price, perhaps as low as it is now.
The fact that Sony would be the only HD console, would be doing well, and would only be against Nintendo (the company that hates gen changes), would mean this would likely become the longest and hardest fought gen ever; either company might have won it in the end.
But there would be one wildcard, a scenario that is unlikely in the real world, but would be very possible in the xbox-less world. With only two companys fighting over a rapidly expanding market, it would be far more likely in this scenario for a new company to enter the console business. I suppose who and how would determine whether that would just put things back where they started, or on to a completely new tangent.
