The dashboard update is MS's response to it. The update in terms of avatars specifically goes with the term middle of the road between Home and the Miis. The XBL primetime is what is supposed to be the separating factor. Whether this takes off or not has yet to be seen. Now of course the dashboard update has several technical upgrades such as the 8 person private chat as well as other goodies that make the service run a lot better and have a lot more functions for the hardcore gamer.
Home is great. The concept is great and while Sony peddled it way too early which has certainly slowed the hype train for a lot of ppl, I think it will be a success. However it's not going to make a big difference, if any, in terms of console sales. Personally, I would have rather had Sony spend the dev time and resources on making the service a lot better from a technical standpoint. This goes for MS as well but to a much lesser extent. Obviously my opinion is based on what I know now and it could very well change once I get my hands on both of the new services.
Consoles Owned: Sega Genesis, NES, PS2 (RIP) N64, Xbox, Xbox 360, PS3, Wii
"In individuals, insanity is rare; but in groups, parties, nations, and epochs it is rule."
~ Friedrich Nietzsche
