Here are my two cents on the situation. I feel that Microsoft is lowering their price not to compete with the Wii persay, but to adopt the Wii owners. I don't have a link but I recall reading that Microsoft feels that the Wii owners will soon be ready to upgrade.
With a lull of good Wii games coming out in the near future this may be the time for them to upgrade. Microsoft knows what the Wii owners like. Their E3 showed off some casual games and avatars...a few months later we hear of a price drop.
If Microsoft is right and the Wii owners are ready to adopt to an HD console, then $199 is a good price. Casual gamers don't have much of a need for a hard drive (if they did then Nintendo would be a little more hasty to release one). The 360 comes with a 256 MB memory card which is the same as the Wii's internal memory.
Think of it from that perspective...it makes so much sense. There's Millions of Wii owners out there who are simply just Wii owners. Microsoft may be right about Wii owners wanting to upgrade, we are embracing the HD era more and more each day.
Honestly I'm a Wii only owner, and a 360 at $199 is hard to pass up, unfortunately I'm one of those owners who wants a hard drive and thinks the PS3 will be better in the long run. Guess we shall see...
Currently playing: Okami (Wii), The World Ends With You (DS), and Shenmue (Dreamcast)
